May 8, 2003
HUD ANNOUNCES SETTLEMENT IN CASE AGAINST 13 NEW YORK LAWYERS FOR VIOLATING REAL ESTATE SETTLEMENT PROCEDURES ACT
Federal coordination signals stepped up RESPA enforcement
WASHINGTON - The Department of Housing and Urban Development today announced a settlement in a civil complaint brought against 13 attorneys in New York for violating the Real Estate Settlement Procedures Act (RESPA). In a case filed in Federal Court in the Eastern District of New York, the United States alleged the lawyers improperly referred their clients to title companies they formed, earning payments based solely on the volume of business referred.
As principle shareholders, the attorneys received referral fees from the title company that they established. As part of the agreement, the title company was required to file amended tax returns for the past three years.
First passed in 1974, RESPA prohibits certain practices that may artificially
increase the cost of settlement services for consumers, thereby inflating the
cost of buying or refinancing a home. For example, Section 8 of RESPA prohibits
a person from giving or accepting any thing of value for referrals of settlement
service business related to a federally related mortgage loan. It also prohibits
a person from giving or accepting any part of a charge for services that are
"We hope today's action will send a clear message to those who provide settlement services to consumers - basing your compensation exclusively on the volume of business referred violates RESPA," said John C. Weicher, HUD Assistant Secretary for Housing. "This case is an example of the excellent cooperation among HUD, the U.S. Attorney's Office and the Internal Revenue Service in enforcing federal law and protecting the rights of consumers."
Brian Bass, S. Charles Buschemi, Michael M. Capasso, Thomas A. Capasso, Ronald Davies, Ronald Farr, Michael Grundfast, Irwin Izen, William J. Porter, Eric Sackstein, Barry Segal, Gary Smith and Alan Wolinsky established Covenant Abstract Company, Inc. and two affiliated title companies � Citation Abstract Company and Titlewaves Abstract. The attorneys agreed to pay $200,000 for the settlement of the RESPA allegations and to divest themselves of any interest in a title company for three years.
Based on HUD's Homebuyer Bill of Rights, Secretary Mel Martinez last year proposed a sweeping reform of RESPA's regulatory requirements in an effort to greatly simplify and clarify the homebuying process for consumers.
HUD is the nation's housing agency committed to increasing homeownership, particularly among minorities, creating affordable housing opportunities for low-income Americans, supporting the homeless, elderly, people with disabilities and people living with AIDS. The Department also promotes economic and community development as well as enforces the nation's fair housing laws. More information about HUD and its programs is available on the Internet.