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HUD Settles Case Against Atlanta-Based Lender And Broker Accused Of Phony Hiring Of Real Estate Agents
Sham "employees" did little or no work for referral fees
WASHINGTON - The Department of Housing and Urban Development today announced a settlement agreement with Atlanta-based lender, Znet Financial, involving alleged violations of the Real Estate Settlement Procedures Act (RESPA). In addition, real estate broker ReMax of Atlanta, certain of their officers and affiliated companies, and 14 ReMax real estate agents agreed to the settlement after HUD determined all violated the anti-kickback and unearned fee provisions of RESPA.
RESPA prohibits kickbacks for the referral of real estate settlement business as well as the giving and receiving of a portion of real estate settlement charges for which no services are performed. A HUD investigation found Znet paid ReMax of Atlanta real estate agents as "employees" even though the agents performed little or no work for the lender.
"RESPA is very clear that creating the illusion of employment to mask otherwise illegal referral fees is not permitted," said John C. Weicher, HUD Assistant Secretary for Housing - Federal Housing Commissioner. "Real estate agents, brokers and lenders should know that they will be held accountable for kickbacks and unearned fees."
HUD's investigation found that Znet represented the ReMax of Atlanta agents as "employees," paying them $400 for each consumer referred to Znet. The real estate agents are actually "sham employees" after investigators found the agents performed little or no origination work other than filling out loan application forms.
Under the terms of the settlement, the companies, their officers and the real estate agents agreed to stop this bogus employee compensation program. Further, the ReMax agents will refund $400 to each consumer referred to Znet for a total of $9,200. In addition, Znet will make a settlement payment to the U.S. Treasury of $15,000.
Three theories exist regarding who has legal title to a mortgaged property
Under the title theory title to the security interest rests with the mortgagee. Most states, however, follow the lien theory under which the legal title remains with the mortgagor unless there is foreclosure. Finally, the intermediate theory applies the lien theory until there is a default on the mortgage whereupon the title theory applies.
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Hud Housing Program
The Uniform Act, passed by Congress in 1970, is a federal law that establishes minimum standards for federally funded programs and projects that re... Read more >
Definition:
A federal law Whereby a person's assets are turned over to a trustee and used to pay off outstanding debts; this usually occurs when someone owes more than they have the ability to repay.
FHA
Definition:
Federal Housing Administration; established in 1934 to advance homeownership opportunities for all Americans; assists homebuyers by providing mortgage insurance to lenders to cover most losses that may occur when a borrower defaults; this encourages lenders to make loans to borrowers who might not qualify for conventional mortgages.
ARM
Definition:
Adjustable Rate Mortgage; a mortgage loan subject to changes in interest rates; when rates change, ARM monthly payments increase or decrease at intervals determined by the lender; the Change in monthly -payment amount, however, is usually subject to a Cap.
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