Industry NewsMortgage

More trouble ahead for Realogy-PHH joint venture

Class-action RESPA lawsuit questions timing of companies’ recent amendments to strategic relationship agreement
  • A lawsuit filed Nov. 25 in California federal court targets the joint venture between Realogy and PHH, alleging that they violated the Real Estate Settlement Procedures Act (RESPA) by operating a “sham” affiliated business arrangement.
  • The complaint alleges that PHH Home Loans failed to disclose the existence of affiliate partners to consumers and was engineered to funnel kickbacks and referral fees.
  • PHH is already under scrutiny for its mortgage reinsurance arrangements.
  • The defendants have not yet responded to the complaint.

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A class-action lawsuit recently filed in California federal court against real estate brokerage franchisor Realogy and embattled mortgage lender PHH may shed some light on the companies’ recent decision to amend their joint-venture agreement. The lawsuit, filed Nov. 25 in the U.S. District Court for the Central District of California, targets the companies’ joint venture, alleging that they, their subsidiaries and their settlement service affiliates violated the Real Estate Settlement Procedures Act (RESPA) by operating a “sham” affiliated business arrangement (ABA) designed to funnel kickbacks and referral fees to each other. Realogy and PHH recently removed provisions in their 10-year-old strategic relationship agreement (SRA) that referred to Realogy as PHH’s “exclusively recommended real estate broker.” The companies have maintained that their agreement is a legal joint venture, but in the wake of the Consumer Financial Protection Bureau’s (CFPB) crac...