HUD Enforces §8
HUD has announced a settlement agreement with First American, a Tennessee title company, for violations of RESPA's §8. First American will pay $680,000 into the US Treasury and make significant changes to its business structure and practices. The case represents the type of violations of RESPA that could be described as classic. The company was charged with creating sham businesses for the purpose of charging unearned fees.
First American had created or acquired eight affiliated title companies with builders, real estate agents, and mortgage brokers. The investigation revealed that although these companies were paid for certain settlement services, the companies did not in fact perform the services. Based on this information and the full investigation, HUD concluded that the companies existed simply to pass referral payments back to the builders, real estate agents, and mortgage brokers.
In addition to civil money penalties, the settlement agreement requires First American to change its business practices by requiring that any affiliate have adequate initial and operating capital to function as a real business and perform settlement services, be staffed with employees who are not shared with any other entity, maintain separate office facilities, and conduct separate marketing.
Copyright © 2005 Compliance Action. Originally appeared in Compliance Action, Vol. 10, No. 9, 8/05
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