BuckleySandler LLP: HUD Settles Two RESPA Referral Fee Cases

Excerpted from Infobytes, a weekly electronic newsletter on developments in financial services law from BuckleySandler LLP. For the full issue of Infobytes, click here: http://www.buckleysandler.com/infobytes/issues/infobytes_july_15_2011/

HUD announced two settlements with companies allegedly paying improper kickbacks or referral fees in violation of the Real Estate Settlement Procedures Act (RESPA). In its settlement with Prospect Mortgage, LLC, HUD alleged that Prospect created series LLCs which were sham business arrangements through which it shared profits with brokers, lenders, and real estate service providers in exchange for referrals and allegedly permitted non FHA-approved branch offices to originate FHA-insured mortgages. In its settlement with Fidelity National Financial, Inc. (FNF), HUD alleged that FNF subsidiaries paid referral fees to real estate brokers as part of sub-licensee agreements for transactions conducted through a web-based platform in connection with the selection of home warranties and title insurance. FNF agreed to pay HUD $4.5 million to resolve the complaint, and Prospect agreed to dissolve the sham business arrangements and pay HUD $3.1 million. 

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