First American Title Insurance Co. has settled with government regulators for millions of dollars allegations it set up 84 Florida partnerships -- some with mortgage brokers -- to circumvent the prohibition of referral fees.
The settlement, announced today by the U.S. Department of Housing and Urban Development, was with the Florida Department of Financial Services, the Florida Office of Insurance Regulation and HUD.
A government investigation found that, since at least 2003, the company allegedly violated section 8 of the Real Estate Settlement Procedures Act by making payments to the Florida partnerships based on business referrals, the statement said. RESPA prohibits giving or accepting anything of value in exchange for settlement business referrals and also prohibits the giving or accepting any part of a charge for services that are not performed.
"While these partnerships were created as title insurance agencies, the joint investigation concluded that all regular title services were performed by First American," the news release stated. "The partnerships acted only as 'pass throughs' to pay real estate agents, mortgage brokers, builders and other limited partners for referring business to First American."
As part of the settlement, signed by First American Chairman Parker S. Kennedy and FHA Commissioner Brian D. Montgomery, First American will pay $5 million and shut down the 84 partnerships, according to HUD. In addition, the title insurer will hire licensed and experienced employees who only work for it. It will also pay for a government monitor.
"First American denies any violation of federal or state law and alleges that it attempted in good faith to comply with the federal regulations and guidelines applying to affiliated business arrangements," a copy of the settlement said.
New York Attorney General Andrew M. Cuomo announced earlier this month he filed a lawsuit against First American Corp. and subsidiary eAppraiseIT alleging the company conspired with Washington Mutual Inc. to produce fraudulent appraisals.
"By allowing Washington Mutual to hand-pick appraisers who inflated values, First American helped set the current mortgage crisis in motion," Cuomo said.
"The complaint ... has no foundation in fact or law," Santa Ana, Calif.-based First American said of the New York lawsuit at the time.