HUD
AND FDIC SETTLE CASE AGAINST NEW ENGLAND MORTGAGE COMPANY
FOR ACCEPTING KICKBACKS FOR BUSINESS REFERRALS
East-West Mortgage Co. received
kickbacks from closing attorneys, appraisers, title companies
WASHINGTON – The Department
of Housing and Urban Development and the Federal Deposit
Insurance Corporation today announced a $150,000 settlement
with one of the largest mortgage companies in New England
for violations of the Real Estate Settlement Procedures
Act (RESPA). HUD and FDIC found that 1-800-East-West Mortgage
Company solicited and received tickets from certain settlement
service providers to Boston Red Sox and New England Patriots
events as well as music concerts and restaurant gift certificates
in exchange for the referral of business.
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.
“RESPA can’t be any more clear when it comes
to the giving or receiving of ‘things of value’
in exchange for the referral of business—it’s
illegal,” said Brian Montgomery, HUD’s Assistant
Secretary for Housing-Federal Housing Commissioner. “The
message to the rest of the industry should be equally clear—we
will not only investigate those who give, but those who
receive kickbacks.”
“RESPA provides important protections for home buyers.
We fully support enforcement of this important consumer
protection legislation,” said Chris Spoth, Acting
Director of the FDIC Division of Supervision and Consumer
Protection.
East-West is a wholly owned subsidiary of Commerce Bank
and Trust Company of Worcester, Massachusetts, which is
a state non-member bank supervised by the FDIC. Through
a joint investigation conducted over the past year, HUD
and FDIC determined that East-West instituted a “give-to-get
policy.” East-West pressured certain closing attorneys,
appraisers and title companies for gifts totaling tens of
thousands of dollars that East-West used as employee incentives.
To maintain their status as East-West’s top settlement
service providers, East-West expected certain attorneys
and appraisers to pay for luxury seating at Boston Red Sox
games and concert events at Fenway Park. In addition, East-West
induced attorneys and appraisers to pay for semi-private
barbeques and charitable galas with Patriot players. East-West
also regularly requested gift certificates to numerous upscale
restaurants in the Boston area.
East-West agreed to pay $150,000 to the U.S. Treasury,
to stop accepting kickbacks from settlement service providers,
and to cooperate with the agencies’ ongoing investigation
of the closing attorneys, appraisers, title companies and
other settlement service providers who provided kickbacks
to East-West. To read the settlement agreement announced
today, visit HUD’s website.
http://www.hud.gov/offices/hsg/sfh/res/eastwest.pdf
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 at www.hud.gov
and espanol.hud.gov.
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