People involved in a real estate transaction in the past 18 months - whether that was buying, selling or refinancing a home - may have unwittingly been involved in an unlawful kickback scheme through a major title insurance company acting as the escrow.
In real estate transactions, there are third-party settlement service providers - companies that provide overnight mail or messenger services, for example. Some major title insurance companies are alleged to have been involved in illegal kickbacks with these third-party settlement service providers as an inducement to use their services.
“We have preliminary information indicating that, depending upon which title insurance-owned escrow company was used, there were such illegal kickbacks paid,” Kick says. “And it could have happened to anyone in California who either purchased a home, sold a home or refinanced a home in the last 18 months.”
The title insurance companies that are alleged to have been involved in illegal kickbacks are among the largest title insurance companies in California. They also tend to have their own escrow company, which is where the illegal kickbacks enter into the transaction, although the escrow company may have no idea about the kickbacks, as they would have been arranged through the third-party settlement service provider and the holding company corporation, which owns the title insurance company.
“These kickbacks are a violation of the Real Estate Settlement Procedures Act [RESPA],” Kick says. “It would be impossible for the consumer to know there was a kickback in their transaction because the disclosure form at the end of the transaction, the HUD-1 [Housing Urban Development Form 1, also called a Final Settlement Statement] does not disclose that information.”
The law that makes such kickbacks illegal is USC 2607 (a) and (b), which reads:
(a) Business referrals
No person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person.
(b) Splitting charges
No person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed.
READ MORE CA REAL ESTATE FEES LEGAL NEWS
In other real estate fees news, Fidelity National Financial reportedly settled a lawsuit filed by California district attorneys alleging the company’s “Transaction Point” software was used by real estate brokers to charge kickbacks from service providers. Fidelity will pay almost $875,000 to settle the charges.