Prudential Locations LLC has agreed to pay $48,000 to settle a U.S. Department of Housing and Urban Development investigation into alleged kickbacks, the department said Tuesday.
HUD said it 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 in violation of Section 8 of the anti-kickback protections of the Real Estate Settlement Procedures Act, known as RESPA.
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, the department said.
During the party, HUD alleged, Prudential sponsored a drawing to award a three-year lease of a Mercedes-Benz automobile to one of its agents. Prudential also provided real estate agents at the party trips to Thailand, Las Vegas, and San Francisco, HUD said. In addition, HUD discovered Prudential offered restaurant gift certificates to referring sales agents, the department said.
“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, in a statement.
“When real estate companies tie gifts and other benefits based on the referral to affiliated businesses, that’s a kickback and that’s against the law,” Montgomery said.
Kickbacks in the real estate arena have taken center stage this year, sparked by a Colorado inquiry into title insurance practices.
John Garamendi, California’s insurance regulator, announced in July that three major title insurers would pay more than $37 million to settle charges of kickbacks to lenders, builders and real estate agents. RESPA is the federal Act governing such violations, among other things.
RESPA was enacted in 1974 to provide consumers advance disclosures of settlement charges and to prohibit illegal kickbacks and excessive fees in the home buying 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, HUD said.
Prudential will also 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 Web site.
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