HUD SETTLES CASE AGAINST MAJOR REAL ESTATE BROKER FOR PAYING REFERRAL FEES TO SALES AGENTS
Coldwell Banker accused of giving gifts and other benefits to referring agents

WASHINGTON - The Department of Housing and Urban Development today announced a $250,000 settlement with Coldwell Banker Residential Real Estate, Inc. for violations of the Real Estate Settlement Procedures Act (RESPA). HUD asserted that Coldwell Banker's Atlanta real estate brokerage offices paid higher sales commissions and offered gifts and other incentives to its sales agents for referring business to an affiliated title company.

Coldwell Banker Residential Real Estate, Inc. maintains an ownership interest in Regency Title Company in the Greater Atlanta area. After a year-long investigation, HUD found that Coldwell Banker Residential Real Estate, Inc. offered its sales agents incentives including trips, Atlanta Braves baseball tickets, and agent-of-the-month ads in local newspapers based on the number and volume of referrals to Regency Title. In addition, HUD discovered that certain agents who referred business to Regency Title received higher sales commissions or were paid immediately at time of closing.

"Clearly, when companies create incentives and base compensation on referrals by their real estate sales agents to their affiliated businesses, that's against the law," said Brian Montgomery, HUD's Assistant Secretary for Housing-Federal Housing Commissioner. "HUD is taking a serious look at affiliated business arrangements to make certain that business practitioners don't blur the line between legitimate relationships and those based on kickbacks and referral fees."

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.

Coldwell Banker Residential Real Estate, Inc. agreed to the $250,000 settlement payment to the U.S. Treasury and to cease the business practices that triggered HUD's concern. In addition, Coldwell Banker Residential Real Estate, Inc. will notify all its real estate agents that any compensation to them based on referring business to affiliated partners is a violation of RESPA. To read the settlement agreement announced today, visit HUD's website.