HUD No. 05-127
September 20, 2005
HUD SETTLES CASE AGAINST PRUDENTIAL FOR PAYING KICKBACKS TO SALES AGENTS
Prudential provided luxury car, trips and party to referring agents
WASHINGTON - The Department of Housing and Urban Development today announced a $48,000 settlement with Prudential Locations, LLC for violations of the Real Estate Settlement Procedures Act (RESPA). HUD found that Prudential's Honolulu real estate brokerage office leased a luxury car, offered vacations and provided other gifts to reward sales agents that referred business to an affiliated mortgage company.
Prudential is affiliated with and has a financial interest in Wells Fargo Home Mortgage Hawaii, LLC. HUD's investigation found that Prudential hosted a "First Annual Wells Fargo Friends Party" and invited only those sales agents that referred over $1 million in business to Wells Fargo. HUD further found that during this party, Prudential sponsored a drawing to award a three-year lease of a Mercedes-Benz automobile to one of its agents. Prudential also provided certain real estate agents attending the party trips to Thailand, Las Vegas, and San Francisco. In addition, HUD discovered Prudential offered restaurant gift certificates to referring sales agents.
It's obvious that when you award prizes based on the amount of business any sales agent refers, you're going to violate the spirit and the letter of RESPA," said Brian Montgomery, HUD's Assistant Secretary for Housing-Federal Housing Commissioner. "When real estate companies tie gifts and other benefits based on the referral to affiliated businesses, that's a kick-back and that's against the law."
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.
Prudential agreed to the $48,000 settlement payment to the U.S. Treasury and to cease the business practices that triggered HUD's concern. In addition, Prudential 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.
HUD is the nation's housing agency committed to increasing homeownership, particularly among minorities; creating affordable housing opportunities for low-income Americans; and 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 and espanol.hud.gov.