[South Florida Mortgage Insider Blog] CitiMortgage Settles RESPA Kickback Case

[Blackacre Lending - Andy Lockwood]

Here's an article I came across in an industry publication. It goes to show you that even one of the biggest names in banking was alleged to do the same unsavory things as the little, scummy bucket shops that give our industry a bad name.

 

Incidentially, that's why I founded and sit on the board of the National Association of Responsible Loan Officers, (www.NARLO.com), an organization of individual loan officers dedicated to making sure the mortgage consumer receives fair, open disclosure and education about the entire loan process.  For more information about how you can prevent being ripped off through excessive closing costs, check out my website, www.FloridaLoanAdvice.com and get my FREE, insider report on How to Avoid Closing Cost Surprises!

 

Here's the article.

 

CitiMortgage and Others Nailed For RESPA Violations Tuesday, July 18, 2006 -

WASHINGTON, D.C. - The Department of Housing and Urban Development announced $1.6 million in settlements under The Real Estate Settlement Procedures Act (RESPA) with a national mortgage lender and two major homebuilders that engaged in business practices involving captive title reinsurance. The agreements included a $650,000 settlement with CitiMortgage, Inc., and its captive title reinsurance company Chesapeake Reinsurance; a $675,000 settlement with M.D.C. Holdings, Inc., certain of its Richmond American Homes homebuilding subsidiaries and AHT Reinsurance; and, a $305,000 settlement with WL Homes, which does business as John Laing Homes, a California and Colorado builder. Captive title reinsurance is a practice whereby a title insurance company transfers a portion of the risk and title premium to a company owned by the builder, lender or real estate broker referring the title business. In HUD's view, any captive title reinsurance arrangements in which payments are not bona fide and exceed the value of the reinsurance are a violation of RESPA. There is particular concern when these arrangements involve an entity that is in a position to refer business to the primary title insurer. There is also strong evidence these arrangements are designed to generate referral fees when there is a history of few or no claims paid. "There is almost never any legitimate need or business purpose for title reinsurance on a single-family residence," said HUD Assistant Secretary for Housing Brian D. Montgomery. "HUD will continue to work with the states to investigate captive arrangements to make certain that they aren't created for the purpose of obscuring referral fees." The companies came forward and cooperated with HUD in reaching these settlements. In addition to the settlement payments, the companies agreed not to enter into any new captive title arrangements and to cease writing new captive title reinsurance business. These are the first settlements in the nation involving the recipients of payments made by title companies to captive companies for reinsurance. The settlements come in the wake of recent settlements states have obtained from title insurance companies who paid significant portions of the premiums they received to such captive companies. The Real Estate Settlement Procedures Act was enacted in 1974 to provide consumers advance disclosures of settlement charges and to prohibit illegal kickbacks and excessive fees in the home buying process. Section 8 of RESPA prohibits a person from giving or accepting anything of value in exchange for the referral of settlement service business.

Originator Times, a BEXT Inc. publication http://originatortimes.com/ Copyright 2006 BEXT Inc. All Rights Reserved

Andrew Lockwood, JD.
Host - "The Best Damn Real Estate & Mortgage Show, Period!"

 

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Posted by Blackacre Lending - Andy Lockwood to South Florida Mortgage Insider Blog at 8/03/2006 05:23:31 AM