WASHINGTON - HUD Secretary Mel Martinez announced today that as part of the Department's initiative on enforcement of the Real Estate Settlement Procedures Act (RESPA), HUD has recently entered into several settlement agreements resulting in more than $2 million in payments for violations involving illegal kickbacks and referrals.

"These cases demonstrate HUD's determination to enforce RESPA and to stop illegal referral fees and unearned fees that may ultimately raise the price that unsuspecting families pay for their homes," Martinez said.

The settlements total over $2,250,000 for consumer housing counseling and education, refunds to homebuyers, and payments to the government. The settlements include agreements with The First American Corp. and Transamerica Corp., providers of flood determination and tax settlement services to hundreds of lenders throughout the country; Conseco Finance Corp., one of the nation's largest lenders; ARVIDA/JMB Partners, a large Florida builder; and Central Pacific Mortgage Corp., a national home lender. The companies cooperated in HUD's investigations and entered into the settlements to resolve the findings of HUD's investigations.

RESPA requires disclosures to homebuyers of settlement costs and provides protections to homebuyers during the process of settlement of a mortgage loan. Section 8(a) prohibits kickbacks and referral fees among settlement service providers and section 8(b) prohibits the charging of unearned fees for settlement services. Section 9 prohibits requiring the use of a particular title company.

"Settlement service providers have a right to be reasonably compensated for their services. They don't have a right to collect illegal kickbacks and unearned fees," said Martinez. "American families shouldn't be overcharged for mortgage services and HUD will continue enforcement action against these abuses."

The recent RESPA settlements include the following cases:

Conseco Finance Corp. (formerly Green Tree Financial Corp.). HUD investigated practices of Conseco Finance Corp. of St. Paul, Minnesota, where its commercial loan division funded manufactured home dealers' floor plan inventories at reduced interest rates (on monthly or annual bases) in exchange for referral of business for retail loans to buyers in land/home combination transactions. HUD concluded that such volume-based referrals for discounts violated Section 8(a) of RESPA, which prohibits the giving or receiving a thing of value for the referral of business. The settlement agreement provides that Conseco will cease and not reinstate these programs, and pay $190,000 to the U.S. Treasury.

The First American Corp. (and subsidiaries and affiliates). HUD investigated First American of Santa Ana, California, certain of its subsidiaries in various parts of the country, and mortgage lenders, for violations of Section 8(a) of RESPA; specifically, where First American provided flood determination services and tax services through contracts with lenders for reduced or no fees on existing loan portfolios in exchange for exclusive servicing of new loans. HUD determined that these transactions amounted to referrals of future business and, therefore, violated Section 8(a). The settlement requires First American to cease such violative contract operations and requires notification to lenders. Additionally, First American will contribute $1,000,000 to approved non-profits for housing counseling assistance and education, and $200,000 will be paid to the U.S. Treasury for costs of investigation and monitoring of the agreement.

Central Pacific Mortgage Corp. HUD has entered into a settlement agreement with Central Pacific Mortgage Corp., a California based national lender with home offices in Folsom, California, involving violations of section 8(b) of the Real Estate Settlement Procedures Act. A RESPA investigation arose in early 2001 from a referral by the State of California Department of Corporations concerning settlement service overcharges by Central Pacific in four of its branch offices, which had been examined by California authorities through routine audits. Investigation by HUD of a representative sampling of 21 of the company's nationwide branch offices revealed that hundreds of overcharges for credit report fees occurred during the time period 1998-2001, but there also had been instances of undercharging borrowers for credit report fees. HUD determined that the upcharges were in violation of section 8(b) which prohibits charging a settlement service fee when no services are provided. Central Pacific was cooperative in the investigation and HUD did not find a pattern and practice of illegal conduct. In the agreement Central Pacific agrees to follow all requirements of RESPA, maintain the company's quality assurance system to avoid such overcharges in the future, and to pay HUD/U.S. Treasury the amount of $50,000.00. An additional $35,000.00 is to be held for application to any refunds or penalties that may be required by the state of California.

ARVIDA. HUD negotiated a settlement with ARVIDA/JMB Partners, a large builder and realty services company in Florida. The settlement resolved allegations of violations of RESPA Sections 8(b) and 9, in the Weston Community in Broward County, Florida. The Section 8(b) allegation addressed ARVIDA's practice of charging a percentage of the house sales price for closing costs, a portion of which was paid for certain closing costs and a portion of which was retained by ARVIDA and not specifically accounted for. The Section 9 allegation involved an added $300 fee to buyers who opted to use their own title agent rather than ARVIDA's affiliate. The Settlement Agreement provides for the cessation of these practices and for the refund of $45,750, most of the additional fee that ARVIDA charged for buyers' using their own title agents.

Transamerica Corp. HUD has entered into a settlement agreement with Transamerica Corp. located in San Francisco and certain of its affiliates located in New Jersey. Based on referrals from bank regulatory agencies HUD investigated allegations of illegal referrals involving flood and tax realty servicing. HUD determined that beginning in 1994-95 Transamerica violated section 8 of RESPA by providing free or reduced-cost portfolio reviews to lenders in exchange for those lenders referring future flood certification and portfolio monitoring review business to Transamerica. Transamerica provided HUD with information as part of HUD's investigation and did not admit to any violation of RESPA in entering into the settlement agreement. Under the terms of the settlement Transamerica will pay $500,000 to HUD approved housing counseling entities for consumer counseling and education. In addition, Transamerica will pay $113,000 to the U.S. Treasury for costs associated with the investigation and oversight of the agreement. Transamerica also agreed to comply with RESPA and, in future agreements with lenders, to have no link between servicing of loans below the cost of providing the service and the future referral of business. Transamerica also agreed to notify certain lenders and reform provisions of contracts with lenders.

Lender Settlements. So far this year, HUD has entered into 38 settlements with lenders for violations of the anti-kickback provisions of Section 8 of RESPA. The violations involve the referral of flood and tax servicing in exchange for free review of existing loan portfolios by tax and flood determination servicers. As part of these settlements $127,000 has been contributed to 30 consumer housing counseling/education agencies (see detailed list below).

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