Prudential Fined $48,000 for RESPA Violation
More tips on RESPA law, guidelines and violations for real estate agents and loan originators from former HUD investigator and RESPA expert, Dr. Gary Lacefield.
This week’s video addresses a party thrown by Wells Fargo for Prudential real estate agents in Hawaii. How could a clambake go so wrong and cost Prudential $48,000? Watch the video or read this RESPA Update below.
View the RESPANewsUpdate.com video here. This educational video and the RESPANewsUpdate.com website were created by WebCasting.com, based in Dallas, Texas. This video is provided for free, compliments of Premier Mortgage Funding, Inc.
For more about Dr. Lacefield, visit RiskMitigation.net or GoGetRealEstate.com/Get/GLacefield.
HUD and Hawaii Regulators Investigate
Prudential & Wells Fargo Party
In January of this year, Hawaii state regulators began investigating Prudential Locations for a 2003 “Wells Fargo Friends” party the company threw whose attendees included agents that referred at least $1 million in business to Wells Fargo.
The Department of Housing and Urban Development announced Sept. 20 a $48,000 settlement with Prudential, one of Hawaii’s largest real estate brokerages, for violations of the Real Estate Settlement Procedures Act (RESPA) stemming from the gathering.
HUD’s investigation found that “Prudential organized, promoted, executed and paid for the ‘First Annual Wells Fargo Friends Party’ (and apparently the last) in January 2003. Only real estate agents who referred over $1 million worth of business to Wells Fargo were invited.”
Prudential’s attorney indicated that HUD’s findings were incorrect. He said. “Attendance was not limited to these agents. Many other people were invited to the party.” Were these other people friends or relatives? He did not clarify that the party did not revolve around these million dollar producers.
At that party, HUD further found that “Prudential paid for and gave real estate agents the opportunity to win a three year lease of a Mercedes-Benz, trips, and other prizes at the ‘First Annual Wells Fargo Friends Party’ in January 2003 in return for their referrals of business to Wells Fargo.” The attorney for Prudential stated that these findings by HUD were not accurate, either. “This is not true,” he said. “The party and the drawings were not inducements to refer business since agents’ eligibility to participate in the drawings was determined based upon events that preceded the announcement of the party.” So he did admit that there had been eligibility requirements to participate in the drawings which within itself would be a RESPA violation.
Prudential signed the $48,000 settlement agreement and agreed to cease the illegal business practices that triggered HUD’s concern. In addition, Prudential agreed to notify all its real estate agents that any compensation to them based on referring business to affiliated partners is a violation of RESPA.
It is clear that the intent of the party, as perceived by the regulatory entities, was to reward the million dollar referrers. In addition, the regulators’ perceived that the gifts awarded perpetuated the illegal referral payment because the attendees’ received the gifts. If the party had been open to all, then Wells and Prudential would not have had these RESPA issues.
For a copy of the settlement agreement: email Dr. Lacefield at: gary@riskmitigation.net