The Department of Housing and Urban Development on Wednesday announced separate settlements with two New England-based real estate companies that were allegedly paying kickbacks for business referrals.
In the first settlement, HUD and the Federal Deposit Insurance Corp. (FDIC) reached an agreement with a Boston-area real estate closing attorney for violations of the Real Estate Settlement Procedures Act, known as RESPA. HUD determined that R. Norman Peters, a member of the board of directors of both 1-800-East-West Mortgage (East-West) and its parent bank, Commerce Bank & Trust Co., of Worcester, Mass., as well as an attorney with the firm Peters & Sowyrda in Worcester, paid for tickets to a Boston Red Sox game and 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.
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, according to HUD.
The second settlement involved a real estate appraisal company in New England that paid kickbacks to East-West, which is one of New England’s largest mortgage lenders. HUD determined that Grasso Appraisal Services (Grasso) of Burlington, Mass., paid kickbacks to East-West and its employees in the form of restaurant gift certificates given in exchange for the referral of appraisal business. Grasso agreed to make a settlement payment to the U.S. Treasury in the amount of $4,000, HUD said.
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.
Both Peters and Grasso 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, HUD reported.
The two settlements follow 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, 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.”