HUD Settles Cases Against New England Attorney And Property Appraisal Firm For Paying Kickbacks For Referrals
September 8, 2006
Settlements follow last year’s RESPA action against New England lender
WASHINGTON - The Department of Housing and Urban Development today announced a joint settlement between HUD, the Federal Deposit Insurance Corporation (FDIC), and a Boston area real estate closing attorney for violations of the Real Estate Settlement Procedures Act (RESPA). In addition, HUD announced a separate agreement with a real estate appraisal company in New England related to kickbacks paid to 1-800-East-West Mortgage Company (East-West), one of New England's largest mortgage lenders.
The two settlements total nearly $20,000 and 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."
HUD determined that R. Norman Peters, a member of the Board of Directors of both East-West and its parent bank, Commerce Bank & Trust Company of Worcester, as well as an attorney with the firm Peters & Sowyrda in Worcester, Massachusetts, paid for tickets to a Boston Red Sox game, 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.
In a separate settlement, HUD determined that Grasso Appraisal Services (Grasso) of Burlington, Massachusetts 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.
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. To read the settlement agreements announced today, visit HUD's website. ===RESPA Settlement Agreements
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 homebuying process. Section 8 of RESPA prohibits a person from giving or accepting anything of value in exchange for the referral of settlement service business.