Articles Posted in RESPA SECTION 8: ILLEGAL KICKBACKS & REFERRAL FEES

Marx Sterbcow of the Sterbcow Law Group will present at the Escrow Institute of California’s 70th Anniversary Conference  at the Hyatt Regency Indian Wells Resort & Spa in Palm Springs, California on May 5, 2017.  The Escrow Institute of California “EIC” Annual Conference is May 4-6, 2017.

The session “Understanding CFPB Enforcement under Unfair Deceptive or Abusive Acts or Practices (UDAAP)” is from 10:15 – 11:45 AM.  Mr. Sterbcow is co-presenting with Matthew Davis with the Davis & Davis Law Group.

Marx Sterbcow, Managing Attorney, of the Sterbcow Law Group will present in two sessions at the 2017 Real Estate Service Providers Council “RESPRO” Annual Conference at the Bellagio Hotel in Las Vegas, Nevada on April 19, 2017.  The RESPRO Conference is from April 18-20, 2017.

The first session “Unfair Deceptive Abusive Acts Practices UDAAP: The Cloud Still Hangs Low” is from 1:30 PM– 2:30 PM in the DaVinci 3 Ballroom. Mr. Sterbcow is co-presenting with Francis (Trip) Riley with Saul Ewing. The presentation will focus on how UDAPP will continue to effect CFPB’s actions on settlement service providers and how RESPA regulated Affiliated Business Arrangements (AfBAs) need to be cognizant of their marketing and advertising efforts. We will address cases of interest and suggest tips that every company should incorporate.

The second session “RESPA: Stretching the Envelope on Prohibited Referrals” is from 2:45 PM – 3:45 PM in the DaVinci 3 Ballroom.  Mr. Sterbcow is co-presenting with Stan Gordon with Gordon & Associates and Francis (Trip) Riley with Saul Ewing.  The presentation will focus on the basic parameters of what is prohibited referral activity have expanded under CFPB which has resulted in a chilling effect on the financial settlement service industry.  The ambiguity in RESPA on defining a referral and the perceived risks in marketing activities in various circumstances will be discussed.  The presentation will provide some clarifications on when an endorsement of a service provider becomes a prohibited referral.  The session will also address whether it is a violation of Section 8 for a nationwide real estate brokerage group to promote a service provider throughout its owned or affiliated companies to their management and sales agents.  How considerations under PHH and RESPA exception Section 8(c)(2) need to be considered and is the exception absolute as implied by the current ruling.

The Legal Description and Dodd Frank Update have teamed up again to provide their 5th annual Regulatory Outlook Webinar on Wednesday, January 18, 2017 (2:00 – 3:30 P.M. EST) educating mortgage, title and settlement services professionals on the compliance trends and issues to expect in the New Year.  The yearly webinar series has quickly become one of the most important educational sessions each year to find out what in store for the State of the Settlement Service Industry in the coming year.

This webinar features instructors Francis “Trip” Riley of Saul Ewing, Loretta Salzano of Franzén and Salzano, and Marx Sterbcow of the Sterbcow Law Group. These nationally-recognized attorneys will join moderator Danielle Kaiser of NATIC in a discussion of the pressing political, regulatory and compliance issues to watch in 2017 and how to prepare your business.

Instruction will include:

Marx Sterbcow, the Managing Attorney, of the Sterbcow Law Group, and Charles Cain, Vice President, Agency, WFG National Title Insurance Co. will present at the 2016 National Settlement Services Summit [NS3] at the Le Meridien & Sheraton Hotel in Charlotte, North Carolina on Wednesday, June 8, 2016.

The session titled “Ethics: UDAAP, Reverse Vendor Oversight and Legal Malpractice” will discuss how Title agents and attorneys are expected to adhere to the highest ethical standards, and how Dodd Frank’s ban on Unfair, Deceptive or Abusive Acts or Practices (UDAAP) have given the CFPB broad authority to root out questionable activities. Learn how UDAAP is requiring agents to gear up when it comes to ethical conduct, particularly in the area of RESPA compliance. The presentation will explain how UDAAP could make vendor management liability and oversight a two-way street through a new enforcement tactic known as “Reverse Vendor Management Oversight”. Reverse Vendor Management Oversight could challenge the bounds of legal malpractice by requiring title agents, lawyers, and attorney notaries to be on the lookout for vendor compliance issues with their clients. Speakers will share real-world examples, and attendees will walk away with actionable tips for remaining UDAAP compliant in an increasingly active RESPA and UDAAP enforcement environment.

October Research Corporation has generously offered a Discount Code to attend NS3 for all friends and clients of the Sterbcow Law Group. To receive your Discount Code please contact the Sterbcow Law Group and we will send you the special discounted rate code to attend NS3.

A consumer class action RESPA lawsuit was filed on November 25, 2015 by Timothy L. Strader Sr., against PHH Corporation, REALOGY Holdings Corp., PHH Mortgage Corporation, PHH Home Loans LLC, RMR Financial LLC, NE Moves Mortgage LLC, PHH Broker Partner Corporation, REALOGY GROUP LLC, REALOGY Intermediate Holdings, Title Resources Group LLC, West Coast Escrow Company, TRG Services Escrow Inc., NRT LLC, REALOGY Services Group LLC, and REALOGY Services Venture Partner LLC in United States District Court for the Central District of California. (Case No. 8:15-CV-1973).

The allegations in this consumer class action lawsuit largely surround issues involving violations of Section 8(a) and Section 8(c)(4) of the Real Estate Settlement Procedures Act of 1974, as amended, 12 U.S.C. §§ 2601 et seq (“RESPA”), and its implementing regulations, 12 C.F.R. §§ 1024.1 et seq. (“Regulation X”). RESPA – and, in particular, the prohibition on referral fees and kickbacks in 12 U.S.C. § 2607 – was explicitly designed to protect consumers “from unnecessarily high settlement charges caused by certain abusive practices,” such as those described in this Complaint. 12 U.S.C. § 2601(a). As such, 12 U.S.C. § 2607(a) prohibits the giving or accepting of any “fee,” “kickback,” or “thing of value” in exchange for business incident to or part of a “settlement service” (as those terms are defined in RESPA and Regulation X) involving a federally related mortgage loan.

The complaints states the Defendants violated RESPA and distorted the market for title insurance and other settlement services in at least two different manners:

First, PHH and Realogy created an affiliated business arrangement called PHH Home Loans, which the Plaintiffs contend was a sham joint venture carefully engineered to facilitate and disguise the payment of unlawful referral fees and kickbacks in exchange for the referral of title insurance and other settlement services to Realogy’s subsidiary, Title Resource Group (“TRG”). The allegations further state that prior to October 21, 2015, PHH was bound under a Strategic Relationship Agreement to refer all title insurance and settlement services to TRG. The consumers referred by PHH Home Loans paid approximately $1650 to TRG for title insurance and other settlement services. If this allegation is accurate it would violate Section 8(c)(4) under RESPA* which prohibits the “Required Use” of an affiliate if the consumer paid for those services.

Pursuant to the Strategic Relationship Agreement, PHH Home Loans is the exclusively recommended mortgage lender for Realogy’s real estate brokerage network, which is operated by NRT, LLC (which operates such brands as Coldwell Banker, Sotheby’s International Realty, ZipRealty, The Corcoran Group, and Citi Habitats.

The Plaintiffs also state that PHH receives a right of first refusal for the purchase of the mortgage servicing rights for PHH Home Loans originated mortgages, which permit PHH Home Loans to sell the servicing rights to PHH “on terms no less favorable” than those that could be obtained from an independent third party and that PHH owns a disproportionate share of the servicing rights for those mortgages relative to PHH’s overall market share of residential mortgage servicing. The complaints states that the details of this relationship have not been publicly disclosed to consumers.

Second, the Plaintiffs allege that under a related Private Label Solutions (“PLS”) model–in which PHH manages all aspects of the mortgage process for various large banking institutions that PHH directs the PLS Partners to refer title insurance and other settlement services to TRG without disclosing to consumers the existence of PHH’s affiliation with TRG, nor the fact that PHH was required to cause the PLS Partners to refer title insurance and other settlement services to TRG under the terms of the Strategic Relationship Agreement.

The complaint further states that the undisclosed mandatory referral arrangement existed for over 10 years until October 21, 2015, when PHH and Realogy amended the Strategic Relationship Agreement to delete the mandatory referral provision. PHH filed their latest Form 10-Q with the SEC on November 5, 2015 and based on the exhibits it did not include the mandatory referral provision language. The Plaintiffs contend the reason that PHH deleted this provision is due to the Consumer Financial Protection Bureau v. PHH Corporation enforcement action where the CFPB fined PHH $109 million dollars for its relationship with Atrium Reinsurance Corporation, an affiliate of PHH.

This is a RESPA class action case worth monitoring given the allegations, parties involved, and the CFPB’s related case against Atrium now pending in Federal District Court. Judge Fernando M. Olguin is presiding over the case.

If you have any questions about how your company’s affiliated businesses are structured please contact us to set up a consultation.
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Marx Sterbcow, managing attorney with the Sterbcow Law Group, and James Milano, member with Weiner Brodsky Kider PC will speak on RESPA News’s webinar series on the topic of Lead Generation Compliance. The webinar is scheduled for Tuesday, November 10, 2015 from 2:20-3:15 PM EST. The Editor of RESPA News, Justine Jones will moderate the webinar.

We will train participants on the regulations governing the real estate lead generation industry and what increased attention the CFPB, Federal Trade Commission, and other agencies mean for your business practices. The webinar will focus on how the CFPB expanded its authority with the use of UDAAP, the potential ramifications of Regulation Z’s Loan Officer Compensation Rule, the dangers of co-marketing with other settlement service providers, and how to carefully vet lead generation companies.

Marx Sterbcow, managing attorney with the Sterbcow Law Group, will moderate a RESPRO Marketing Service Agreement webinar with Phil Schulman, partner at K&L Gates on October 22, 2015. The RESPA webinar titled “To Agree to Market or Not Agree to Market” will discuss how MSAs have been around for 20 years and in June of 2010 HUD’s RESPA Division issued an interpretative rule. Now however, after the CFPB’s RESPA consent order in Lighthouse Title, the PHH decision, and the recent CFPB Bulletin 2015-05, Marketing Service Agreements a/k/a MSAs have become a controversial and hot topic. Learn what you can do and what you can’t do based on the latest CFPB guidance.

Marx Sterbcow, managing attorney, of the Sterbcow Law Group, has been invited to speak at the Louisiana Bankers Association 2015 Bank Counsel Conference on the topic of “Who’s Your Vendor? Secondary Market Compliance & Title Agent Vendor Management.” The session will provide insight into how banks should be managing their vendors and what requirements they should be requiring their title agent vendors to have in place. The presentation will also focus on managing the third party vendor management risks in a Post-TRID world and the expectations the secondary market will be playing in this new changing regulatory landscape.

The 2015 Bank Counsel Conference will be held on December 10-11, 2015 at the Ritz Carlton Hotel in New Orleans.

The United States Court of Appeals for the Ninth Circuit issued their 24 page Opinion today, August 24, 2015, in the Denise P. Edwards versus The First American Corporation; First American Title Insurance Company class action lawsuit. No. 13-55542 D.C. No. 2:07-cv-03796-SJO-FFM.

The Edwards v. First American class action lawsuit was originally filed on June 12, 2007 and has spent over 8 years bouncing from federal court to federal court.

The 9th Circuit Court of Appeals affirmed in part and vacated in part the United States District Court for the Central District of California’s order denying class certification in a case where the Plaintiffs alleged that First American Title engaged in a national scheme of paying title agencies things of value in exchange for the title agencies’ agreement to refer future title insurance business to First American in violation of the Real Estate Settlement Procedures Act “RESPA”.

Marx Sterbcow, Managing Attorneyat Sterbcow Law Group, and Charles Cain, Of Counsel to Sterbcow Law Group and Senior Vice President to WFG National Title Insurance Company, will speak at the 2015 National Settlement Services Summit“NS3” Conference in Atlanta, Georgia on June 9, 2015. The presentation “Who’s Your Vendor? Vendor Management for Title Agents” will provide in-depth analysis and guidance on how title agents can understand and monitor the risks associated with their vendor relationships. We will discuss third party vendor management expectations originating not just from the OCC/FFIEC/FDIC/CFPB but from the secondary market on closing and settlement providers.