Title Attorney Settles with HUD for Kickbacks

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, Dr. Lacefield reviews the case of1-800-East-West Mortgage Company, one of New England’s largest mortgage lenders, who pays $150K and becomes part of ongoing probe.

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 and Century 21 Mike Bowman, Inc.

For more about Dr. Lacefield, his training and compliance programs and CDs, please visit RiskMitigation.net or GoGetRealEstate.com/Get/GLacefield.

Title Attorney Settles with HUD for Kickbacks - Boston Kickback Probe Far From Over

On Sept. 6th of last year, HUD announced a RESPA settlement against a Boston-area real estate closing attorney in New England related to alleged kickbacks paid to 1-800-East-West Mortgage Company, one of New England’s largest mortgage lenders.

The settlement followed an agreement HUD and FDIC announced last November involving allegations of East-West requesting and/or receiving kickbacks for the referral of settlement service business. In that settlement, the two government agencies found that 1-800-East-West Mortgage Company instituted a “give-to-get policy” and pressured certain closing attorneys, appraisers and title companies for gifts totaling tens of thousands of dollars that East-West used as employee incentives.

To maintain their position as one of East-West’s top settlement service providers, East-West allegedly expected certain attorneys and appraisers to pay for luxury seating at Boston Red Sox games and concert events at Fenway Park. In addition, East-West allegedly induced attorneys and appraisers to pay for semi-private barbeques and charitable galas with Patriot players. East-West also allegedly regularly requested gift certificates to numerous upscale restaurants in the Boston area.

East-West agreed to pay $150,000, not to receive or request any thing of value from any settlement service provider for the referral of settlement services, and to cooperate with the ongoing investigation of the closing attorneys, appraisers, title companies and other settlement service providers who provided kickbacks to East-West.

“Regardless of the size of the business, kickbacks and referral fees ultimately hurt the consumer,” said Brian Montgomery, HUD’s Assistant Secretary for Housing-Federal Housing Commissioner. “The law is clear it is illegal to give or to get anything of value in exchange for the referral of settlement service business. For HUD’s part, we will continue to take a hard line against these sorts of artificial influences on the cost of buying or refinancing a home mortgage, whether from those who pay or receive referral fees in violation of RESPA.”

While investigating the case, HUD determined that R. Norman Peters, a member of the Board of Directors of both East-West and its parent bank, Commerce Bank & Trust Company of Worcester, as well as an attorney with the firm Peters & Sowyrda in Worcester, Mass., paid for tickets to a Boston Red Sox game, a New England Patriots’ event, and upscale restaurant gift certificates. HUD found these tickets and gift certificates were then provided to East-West and its employees to promote referrals of loan closings from East-West to Peters’ firm.

According to the settlement document, HUD found that “beginning approximately December 2002 and continuing subsequently, Peters paid for and/or subsidized the purchase of tickets and premium seating to a Boston Red Sox baseball game for East-West, tickets to a special event with the New England Patriots for East-West, restaurant gift certificates for East-West, and lunch for all East-West employees, in exchange for the referral of business.”

Peters agreed to pay a civil money penalty to the FDIC and to make a settlement payment to the U.S. Treasury totaling $15,000. Peters agreed not to give gifts and things of value to settlement service providers in exchange for business referrals, to comply with RESPA, and to cooperate with the agencies’ ongoing investigation of other settlement service providers who provided kickbacks to East-West Mortgage. Peters likewise told the Worcester Telegram & Gazette News that he only agreed to the settlement to resolve the issue, and that he had done nothing wrong.

Peters acknowledged that he once took some East-West Mortgage employees to a New England Patriots game (he was a season-ticket holder) and to a Boston Red Sox game, but said it was merely meant as a social event, not as a means to induce referrals. Regarding paying the HUD and FDIC fine, Peters reportedly said, “I see it as just a cost of doing business.”

In my opinion, this is the type of attitude that will keep the regulators aggressively knocking on our doorsteps for years to come