Not a Surprise: Fidelity to Pay HUD $4.5 Million to Settle Alleged RESPA Kickbacks Violation

What Can this Mean for Brokers?

RE-Insider was the first to question the legality of Fidelty’s TransactionPoint software last year in June. We continued to ask questions in December. And last month, we revealed that Fidelity suspended all payments to brokers made under their Real Estate Service Provider Access Agreements because of potential alleged RESPA violations.

Now HUD has taken decisive action and the title company is on the hook for a whopping $4.5 million in penalties. Fidelity has also agreed to cease certain TransactionPoint practices immediately. Here’s what HUD announced:

The U.S. Department of Housing and Urban Development (HUD) announced an agreement with Fidelity National Financial, Inc. (FNF) to settle allegations the title company paid real estate brokers and other settlement service providers improper kickbacks or referral fees in violation of the Real Estate Settlement Procedures Act (RESPA).

HUD claimed FNF and its affiliates and subsidiaries engaged in a widespread and years-long campaign to pay real estate brokers kickbacks for the referral of real estate settlement services, including home warranties and title insurance. (Read the actual Full Settlement PDF)

“This agreement should be a signal to others that these business practices won’t be tolerated,” said Acting FHA Commissioner Robert Ryan.

Although HUD is settling with Fidelity, it is not granting immunity to the brokers that accepted the kickbacks from TransactionPoint, as far as we can tell.

Where does this leave Fidelity’s brokerage partners? These professionals could face further prosecution from HUD or the Consumer Financial Protection Bureau (CFPB), when they take over RESPA enforcement on July 21.

Did Fidelity tell HUD the names of the brokers who accepted TransactionPoint payments? Will these brokerages have to wait and see which enforcement agency comes after them? RE-Insider ponders if, based on this precedent, individual agents and brokers may be looking at three times the amount received plus damages and attorney fees.

We also have to wonder whether brokers are looking to Fidelity for the legal help and money to cover the damages caused. Did Fidelity say that TransactionPoint access fees were in compliance with RESPA? What is Fidelity saying now?

This may be only the beginning of a nightmare of unimaginable size for the real estate professionals who used the TransactionPoint service and received access fees.

We’d like to hear your thoughts.

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  • JC

    All that this is creating is, like you said, a nightmare for the industry…. so that means, for example, that an agent can get in trouble for referring a client to another office??? and get a kickback( a referral)?? due to the fact that you will be tunneling the client to that office and agent??? or whats next.. ha ha ha

    • RE-Insider

      Good questions – I suggest you ask a lawyer about the specifics, but it seems the RESPA is stepping up enforcement across the board.

  • Konstantine

    I wonder if the $4.5 million is more or less than they made from the business they brought in from TransactionPoint. And by wonder, I mean I think we all have a pretty good idea…

    • RE-Insider

      Great point – Really makes you wonder.

  • Penelope

    It makes you wonder how many other title companies, like First American and Placer, have been engaged in similar behavior right under HUD’s nose. I bet the employees of companies like FNF or that work with are now realizing one thing – that HUD’s rules and laws are meant to be followed, or individuals themselves could be found at fault.

    • RE-Insider

      I hope that employees are starting to realize that as well. Good points Penelope.

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  • Rick

    I hope they nail the brokers and agents involved. When they do maybe these deplorable practices will finally cease. Thanks!

    • RE-Insider

      It seems that HUD is getting more involved. I hope you’re right.

  • LG

    I am glad for the investigation and hope it continues to all offices who have inside services like loans, escrow, and in some way advice to use one particular title. Most of the time agents do not know the profits the brokers receive.
    I believe is about time the Real Estate industry regain the consumer’s TRUST.

    • RE-Insider

      Any transparency is good. I wish all offices disclosed fully what they were doing.

  • Mary

    I would like your insight into this. If Respa is so adamant about not steering a buyer to one service provider, then why is it that they allow entities like Bank of America to pay the broker/Owners a desk fee and steer all buyers to aquire loans from Bank of America by not allowing any other lenders to have access to the agents in that office (closed offices). I understand Coldwell banker was cited for that very reason. Bank of America was paying the Broker/Owner $2,500 a month desk fee, when they could have rented a bigger space down the street for the same amount. If Coldwell banker was cited then why is Bank of America still allowed to do this? Sounds like a Respa violation to me.

    Who would you suggest I contact?

    • RE-Insider

      This is a very interesting email. No one in our organization knows the answer to this question, but we are as interested to find out as you are. We are taking this question to the CFPB and will let you know as soon as we find out.

      Keep the great questions coming!

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  • Monique Bryher

    $4.5 million is not a “whopping” penalty for Fidelity; it’s barely a footnote on their ledgers.