“Title Group Builders” Nailed with HUD Fine
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 deals with a $226,000 fine for “Title Group Builders” in Tennessee. HUD determined that First American Title paid the nine builders that make up Title Group Builders for certain title and settlement work they did not perform, services that were essentially provided by First American Title. The builders accepted payment through “sham business arrangements” in violation of RESPA’s anti-kickback and unearned fee provisions.
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.
“Title Group Builders” Nailed with HUD Fine
In December, HUD settled kickback charges with nine Tennessee builders known as the Title Group Builders for $226,000.
The Department of Housing and Urban Development announced a legal settlement with nine Tennessee builders for violating the Real Estate Settlement Procedures Act. HUD claimed the nine, collectively known as “Title Group Builders,” received payments from a Tennessee title company for settlement services that were never performed. Such “sham affiliated business arrangements” violate RESPA’s anti-kickback and unearned fee provisions. The Title Group Builders are: Oaktree Homes, LLC; Vintage Homes, LLC; Bronze-Christian, LLC; P & G Capital Partners, LLC; Summit Homes, LLC; Lenox Homes, LLC; Riverbirch Homes, LLC; Richard and Milton Grant Co.; Downing Homes, Incorporated.
Title Group Builders agreed to a $226,000 settlement and cease any further business operations involving the sham business affiliations. This settlement demonstrates HUD’s commitment to enforce RESPA not only against parties giving funds but also against parties receiving funds.
Brian Montgomery, the FHA Commissioner stated, “It’s pretty obvious the law requires that when money changes hands in the mortgage transaction, actual service should be provided. But there’s a big difference between performing real work and creating sham business arrangements designed to mask illegal kickbacks and referral fees.”
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.
HUD’s investigation determined that First American paid the nine builders that make up Title Group Builders for certain title and settlement work they did not perform-services that were essentially provided by First American.
HUD concluded that the nine companies were sham businesses that were paid to make referrals to First American in violation of RESPA. To ensure that you do not find yourself in the same predicament as the Title Group Builders, and stay in compliance with RESPA, you should: Have sufficient initial and operating capital to perform settlement services; Be staffed with employees who work for that entity; and comply with other RESPA and HUD policy statements by competing in the marketplace for title insurance business and actively seeking business from parties other than the builders, real estate agents, and mortgage brokers, or other settlement service providers that created the entity.