Fidelity pays $4.5M to settle kickback allegations

Fidelity National Financial Inc. has agreed to pay federal regulators $4.5 million to settle allegations that it paid illegal kickbacks to potentially hundreds of real estate brokerages for referring title insurance, home warranty and other business to the company through a Web-based transaction management platform, TransactionPoint.

Fidelity National Financial (FNF), the nation's largest title insurance underwriter, denied the allegations and said the payments did not violate provisions of the Real Estate Settlement Procedures Act (RESPA) governing the payment of referral fees.

According the settlement agreement between FNF and the U.S. Department of Housing and Urban Development (HUD), real estate brokerages allegedly entered into application service provider agreements with Fidelity, which provided the brokerages with access to TransactionPoint.

The brokerages, in turn, entered into sublicensing agreements with closing-cost providers, including subsidiaries of Fidelity, enabling those subsidiaries to be listed in TransactionPoint as providers of settlement services, HUD said.

FNF's subsidiaries paid the real estate brokerages a fee for each referral they received -- a violation of RESPA's anti-kickback provisions, HUD alleged.

FNF maintains that the payments its subsidiaries received were for the use of the TransactionPoint platform, and not for the referral of settlement service orders. The payments were made even if transactions failed to close, the company said.

The payments were for "valuable goods and facilities actually furnished and services actually performed," and therefore did not violate RESPA's anti-kickback provisions, FNF maintained. No charges to consumers were affected, the company claimed.

FNF said it voluntarily stopped paying real estate brokers who placed orders for title insurance and other goods or services using TransactionPoint, and will terminate "any arrangement involving the payment of fees to any real estate brokers" for use of TransactionPoint.

In a press release, HUD claimed FNF and its affiliates and subsidiaries engaged in a "widespread and years-long campaign to pay real estate brokers kickbacks for the referral of real estate settlement services, including home warranties and title insurance."

A HUD spokesman told Inman News the allegations pertained to "Potentially hundreds of brokerages involving thousands of transactions."

A spokesman for FNF said the company would have no comment.

A blog, RE Insider, reported in June that Fidelity had already suspended payments to brokers who were referring business through TransactionPoint on May 27. The blog cited a June 3 memo from Fidelity National Financial to real estate brokers. RE Insider also posted what the site said was a sworn affidavit by Fidelity National Financial Vice President Steve Murnin -- apparently filed in conjunction with a related civil lawsuit.

Murnin referred a request to comment to FNF's Chief Compliance Officer, Paul Perez, who did not respond to a request for comment.

With HUD having ruled that Fidelity's payments to brokerages violated RESPA, companies that used TransactionPoint to drum up business could now face civil suits -- the document posted at RE Insider suggests they already are.

Allegations that several brokerages in California received kickbacks for referring more than 300,000 orders for natural hazard disclosure reports to another company, Property ID, were the basis of a class-action lawsuit that was eventually settled for $39.3 million in 2009.

The lawsuit alleged that Property I.D. formed sham "affiliated businesses" with real estate brokerages to share profits from the sale of overpriced natural hazard disclosure reports. After deducting $50 per report to cover expenses, Property I.D. allegedly split the remaining $50 profit with referring brokers.

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