September 29, 2003
HUD SETTLES CASE AGAINST ATLANTA-BASED LENDER AND BROKER ACCUSED OF PHONY HIRING OF REAL ESTATE AGENTS
Sham "employees" did little or no work for referral
WASHINGTON - The Department of Housing and Urban Development today announced a settlement agreement with Atlanta-based lender, Znet Financial, involving alleged violations of the Real Estate Settlement Procedures Act (RESPA). In addition, real estate broker ReMax of Atlanta, certain of their officers and affiliated companies, and 14 ReMax real estate agents agreed to the settlement after HUD determined all violated the anti-kickback and unearned fee provisions of RESPA.
RESPA prohibits kickbacks for the referral of real estate settlement business as well as the giving and receiving of a portion of real estate settlement charges for which no services are performed. A HUD investigation found Znet paid ReMax of Atlanta real estate agents as "employees" even though the agents performed little or no work for the lender.
"RESPA is very clear that creating the illusion of employment to mask otherwise illegal referral fees is not permitted," said John C. Weicher, HUD Assistant Secretary for Housing - Federal Housing Commissioner. "Real estate agents, brokers and lenders should know that they will be held accountable for kickbacks and unearned fees."
HUD's investigation found that Znet represented the ReMax of Atlanta agents as "employees," paying them $400 for each consumer referred to Znet. The real estate agents are actually "sham employees" after investigators found the agents performed little or no origination work other than filling out loan application forms.
Under the terms of the settlement, the companies, their officers and the real estate agents agreed to stop this bogus employee compensation program. Further, the ReMax agents will refund $400 to each consumer referred to Znet for a total of $9,200. In addition, Znet will make a settlement payment to the U.S. Treasury of $15,000.
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.