Ever have a client who bought a house, and was concerned about all the fees they were paying while signing page after page of legal documents? Well if you did, they were entirely right to worry.
Due to a wave of lawsuits and government investigations, a light has been shed on suspicious dealings among some of the people who sell us houses, mortgages, title insurance, and other real estate services.
Regulators and private lawyers have discovered kickbacks and sham agreements that inflated fees paid by customers, and discouraged free competition. Many of these shady dealings occurred during the real estate boom before the 2008 financial crisis. Today, it is important that consumers be aware of the dangers when purchasing a home.
Recently, a Maryland civil case claimed that a Howard County real estate agent, Creig Northrop, took in hundreds of thousands of dollars he received through unlawful payments over a period of 13 years, to send settlement business to a local title firm. The suit alleges that the kickbacks violated a federal law designed to protect home buyers against these malpractices. Three thousand customers were harmed throughout the 13 years, and are now asking for $11.2 million in damages.
According to court papers, Northrop received $6,000 to $12,000 a month from Lakeview Title under a 2008 marketing agreement between the two parties, which outlined that Northrop would “designate Lakeview as its exclusive preferred settlement and title company,” and would not “designate or endorse any entity” other than Lakeview for such business. Northrop denies the charges and is fighting the complaint, alleging that all payments were for permissible services and not for referrals.
Northtrop’s case is just one of many to have been uncovered. On April 4, the U.S. Consumer Financial Protection Bureau announced that four major national mortgage insurers agreed to pay $15.4 million in penalties to settle a complaint that they had made improper payments to mortgage lenders in exchange for business.
On a general scale, lack of disclosure is a definitely problem. Seeking independent advice from people who have no financial stake in the transaction is advised. Are you surprised by these lawsuits? Share your thoughts with us.
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