New England mortgage co. settles kickback investigation
November 18, 2005
East-West Mortgage agrees to pay $150,000
The Department of Housing and Urban Development and the Federal Deposit Insurance Corp. 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, known as RESPA.
HUD and FDIC found that 1-800-East-West Mortgage 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.
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.
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.
HUD has ramped up its enforcement of RESPA this year, tripling its enforcement staff and doubling its enforcement budget.
"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."
East-West is a wholly owned subsidiary of Commerce Bank and Trust Co. of Worcester, Mass., 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, according to the agencies.
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, according to HUD.
Copyright 2005 Inman News