Realogy and PHH Corp. will pay $17 million as part of a class-action suit in which they were accused of providing kickbacks to title providers.

Realogy Holdings Corp., a real estate franchise group, and PHH Corp., a mortgage solutions provider, will pay $17 million as part of a class-action lawsuit in which the companies were accused of providing kickbacks to affiliated title and settlement providers through a now-defunct joint venture, PHH Home Loans.

In the suit, originally filed in Nov. 2015 in the U.S. District Court for the Central District of California, the plaintiffs described PHH Home Loans as a “sham venture” designed to facilitate and disguise the payment of unlawful referral fees and other kickbacks to Realogy’s Title Resource Group and 37 subsidiaries across 20 states.

PHH Home Loans was the exclusive mortgage lender for Realogy’s real estate brands and PHH agreed to refer all title and settlement services to the Title Resource Group and its subsidiaries, according to the lawsuit. In return, PHH allegedly received monetary and non-monetary referral fees and kickbacks. Lawyers for the co-plaintiffs claimed the arrangement violated key statutes of the Real Estate Settlement Procedures Act (RESPA).

In one case, plaintiff Lester Hall Jr., who along with others initiated the lawsuit, purchased a home in Santa Ana, Calif., in April 2007. Hall was represented by a Coldwell Banker agent who referred him to First Capital, which then placed the loan with PHH Mortgage, according to a previous story by Inman.

First Capital was a trade name of Hamera Corp., one of the small corporations referenced in PHH-Realogy’s strategic relationship agreement that established PHH Home Loans as the “exclusively recommended mortgage lender of Realogy’s vast real estate brokerage network.”

When the transaction closed, Hall paid PHH Mortgage a third-party mortgage fee of $3,800 to First Capital, and Hall was required to pay an additional $1,012 in settlement fees to First Capital. Hall said he was never informed of First Capital, PHH Mortgage, and Coldwell Banker’s relationship.

In the complaint, Hall’s lawyer, Howard Privette, said the class members weren’t “notified of any of the contractual obligations between and among defendants by which they had agreed to exchange referrals, preferences, exclusivities and other things of value in relation to the settlement services,” and “paid more for settlement services than he would have paid in the absence of the anticompetitive referrals and kickbacks.”

The $17 million settlement will be dispersed among 32,217 co-plaintiffs who closed on mortgages originated by PHH Corporation, PHH Mortgage Corporation, PHH Home Loans or their affiliates, including loans in which PHH Mortgage Corporation provided origination services on behalf of private-label partners between Nov. 25, 2014 and Nov. 25, 2015.

“We are very proud of this result which provides class members with cash payments of approximately 17.7 percent of the title-, escrow-, and closing-related charges they paid in connection with the qualifying mortgage loans, which is an average payment of over $360 to each of the 32,217 class members,” said lawyer Evan Borges in a statement.

Realogy and PHH have maintained their innocence, and in 2017, PHH pulled out of the partnership with Realogy, saying the decision was “a result of our review of strategic alternatives.” Realogy has since started a new venture with Guaranteed Rate called Guaranteed Rate Affinity.

In an interview with HousingWire, Realogy declined to comment on the settlement. PHH executives offered a statement in which they insisted the relationship with Realogy complied with RESPA regulations.

“In May 2017 we agreed to resolve this matter which was filed in 2015, without admitting liability, in order to avoid the distraction and expense of continued litigation. The final approval of the settlement by the Court is the last step in the legal process,” PHH told HousingWire.

“We firmly believe we complied with the Real Estate Settlement Procedures Act and other laws applicable to our former joint venture with Realogy,” the statement continues. “Adhering to high legal, regulatory and ethical standards is at the core of how we conduct business, and we remain committed to serving our customers and all of our stakeholders consistent with that principle.”

A PHH spokesperson declined to comment further on the matter when an Inman reporter requested information on the settlement.

Read the court documents below:

Email Marian McPherson

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