HUD settles RESPA kickback charges with builder, title company

Mortgage Banking, May, 2007

A New Mexico-based home builder and a Florida-based title company will pay HUD nearly $90,000 to settle charges that the two firms were engaged in a business arrangement that traded kickbacks for referrals in violation of the Real Estate Settlement Procedures Act (RESPA).

HUD alleged that Jacksonville, Florida-based Fidelity National Title Insurance Co. and Albuquerque, New Mexico-based Longford Homes of New Mexico Inc. were engaged in a business arrangement that violated RESPA's anti-kickback and referral fee provisions.

HUD initiated its investigation of settlement service practices in Albuquerque to determine whether Fidelity's marketing arrangement with Long-ford Homes violated RESPA. HUD said it concluded that Fidelity provided prepaid "just sold" and "just listed" postcards and listing agreements to real estate agents at no cost or below cost.

In addition, HUD found that Fidelity essentially provided Longford with a $25,000 annual line of credit in exchange for the referral of settlement service business. That fund enabled Longford to obtain store gift certificates, event tickets and dinners for Longford employees and real estate agents.

Section 8 of RESPA prohibits a person from giving or accepting anything of value in exchange for the referral of settlement service business. It also prohibits a person from giving or accepting any part of a charge for services that are not performed.

"Kickbacks and referral fees hurt consumers by artificially driving up the cost of buying a home," said Brian Montgomery, HUD's assistant secretary for Housing-Federal Housing Commissioner. "The law clearly prohibits the giving or taking of anything of value in exchange for the referral of settlement service business."

As a result of the agreements with HUD, Fidelity agreed to pay $68,635 and Longford Homes agreed to pay $20,700 to the U.S. Treasury and to cease the conduct that triggered the HUD sanctions.