Party for Agents Ends in HUD Settlement

Prudential Locations LLC pays $48,000 over RESPA violations

January 11, 2006

By PATRICK CROWLEY

Prizes doled out at the gathering included a three-year lease on a Mercedes Benz and trips Las Vegas, San Francisco and even Thailand.

But the largesse was, according to the federal government, illegal. And Prudential, one of Hawaii’s largest real estate brokerages, paid $48,000 to settle claims brought by the U.S. Department of Housing and Urban Development.

And now Hawaii state regulators are investigating.

In a brief e-mail message to MortgageDaily.com Jo Ann Uchida, complaints and enforcement officer with Hawaii Regulated Industries Complaints Office, confirmed the investigation but would offer not details.

“The state is investigating. No other information is available at this time,” Uchida said.

In a statement, HUD said Prudential was accused of violating the Real Estate Settlement Procedures Act, or RESPA.

“HUD 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,” the agency said.

The acts are alleged violations of federal law. Prudential, which did not return e-mails to comment, admitted no wrong doing in settling the charges.

Prudential has a “financial interest” in Wells Fargo Home Mortgage Hawaii LLC, according to the HUD statement.

In an e-mail response to MortgageDaily.com Wells Fargo denied any responsibility or involvement in the settlement or the party.

“Wells Fargo Home Mortgage was not involved in the settlement between HUD and Prudential Locations, as neither Wells Fargo Home Mortgage, nor its joint venture Wells Fargo Home Mortgage of Hawaii LLC participated in any of the activities that allegedly violated the Real Estate Settlement Procedures Act,” spokesman Kevin Waetke wrote in the message.

“Wells Fargo Home Mortgage of Hawaii is a bona fide mortgage banker whose main purpose is to carry on the business of residential mortgage lending in the state of Hawaii,” Waetke said. “Wells Fargo’s Hawaii operations are conducted in compliance with the requirements of RESPA.”

According to HUD, Prudential had its “First Annual Wells Fargo Friends Party” in 2003 and invited only the agents that referred more than $1 million in mortgage business to Wells.

Along with the Mercedes lease and the trips, restaurant gift certificates were also handed out as prizes, HUD 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,” Brian Montgomery, HUD’s assistant secretary for Housing-Federal Housing commissioner, said in the 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.”

RESPA was enacted in 1974 to provide consumers advance disclosures of settlement charges and to prohibit illegal kickbacks and excessive fees.

It also “prohibits a person from giving or accepting anything of value in exchange for the referral of settlement service business,” according to HUD.

Patrick Crowley is a MortgageDaily.com feature journalist and blogger, and a reporter, blogger and columnist for The Cincinnati Enquirer. e-mail Patrick at: [email protected]