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An Atlanta-based mortgage company settled government allegations that it paid sham employees for little or no work — a violation of RESPA.
Znet Financial, an online and traditional mortgage lender, agreed to a settlement involving alleged violations of the Real Estate Settlement Procedures Act (RESPA), HUD reported. Real estate broker ReMax of Atlanta and 14 ReMax agents also agreed to the settlement after HUD, which enforces RESPA, determined all violated the anti-kickback and unearned fee provisions of RESPA. HUD — also known as the U.S. Department of Housing and Urban Development — says RESPA protects consumers by prohibiting a person from giving or accepting any thing of value for referrals of settlement service business related to a federal mortgage loan. Additionally, RESPA prohibits fee-splitting and receiving unearned fees for services not actually performed, according to HUDs web site. The agency, which recently tripled its RESPA staff from 10 to 30, said investigators found Znet was paying ReMax agents $400 for each referral sent to the company and was representing the agents as employees. HUD said the agents did little or no work beyond filling out a loan application. “RESPA is very clear that creating the illusion of employment to mask otherwise illegal referral fees is not permitted,” the HUD Federal Housing Commissioner said in a statement issued Monday. “Real estate agents, brokers and lenders should know that they will be held accountable.” “Znet Financial does not agree with HUD’s assessment of the compensation program,” a company spokeswoman said in an email statement to MortgageDaily.com. “It continues to believe that the loan officers in question were Znet employees for all relevant legal purposes, including RESPA.” The company reportedly agreed to pay a $15,000 settlement to the U.S. Treasury, and ReMax agents agreed to reimburse a total of $9,200, refunding $400 to each consumer referred to Znet. The company said it agreed to the HUD settlement “so as not to distract attentions from its core business.” The settlement follows a Znet announcement issued in March reporting a strategic alliance with ReMax Neighbors of Gainesville, which had recently merged with ReMax of Atlanta. Both companies signed an agreement to provide ReMax customers access to the lowest mortgage rates in the state, according to the announcement. |
Coco Salazar is an assistant editor and staff writer for MortgageDaily.com.
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