Editor’s Note: It has come to RE-Insider’s attention that this lawsuit was originally filed in June of 2012 and dismissed in September of last year. RE-Insider apologizes for the confusion. We do, however, still feel that this lawsuit is an important discussion topic for agents and brokers and we will continue to seek clarification on the issue of liability.

Just as RE-Insider predicted when the HUD settlement came out earlier this month, angry homeowners have filed a federal consumer fraud class action lawsuit against Fidelity National Title Insurance and other major title insurers alleging the companies kicked back fees to real estate agents for real estate settlement services.

This class action suit comes on the heels of Fidelity agreeing to pay a $1.25M settlement to the state of California for alleged RESPA kickbacks violations after a previous case that led to a 2011 settlement where Fidelity agreed to pay the federal government $4.5M for the same violations.

According to the lawsuit, lead plaintiff Matthias Hildebrandt claims Fidelity National Financial Inc. settled with the U.S. government in 2011 for violating the Real Estate Settlement Procedures Act (RESPA). RESPA protects homebuyers by prohibiting kickbacks and fees for real estate settlement services in federal backed mortgage loans.

Fidelity paid predetermined fees for each referral, but real estate agents and brokers “performed no bona fide work for the fees,” according to the lawsuit. “In short, the scheme allowed defendants and participating real estate agents and brokers to camouflage illegal kickbacks and referral fees as sub-license payments.”

The new lawsuit alleges that Fidelity ran the scheme through their web-based platform TransactionPoint, which “allowed kickbacks and referral fees to be disguised as ‘sublicense fees’ or ‘access fees.’”

The class alleges Fidelity paid millions of dollars in kickbacks and referral fees, to “hundreds, if not thousands” of real estate agents and brokers.

Also named as defendants are Commonwealth Land Title Co., Chicago Title Co., Ticor Title Co. of California, Lawyers Title Co., Fidelity National Disclosure Source LLC, and Fidelity National Home Warranty Co. The class is seeking restitution and damages for RESPA violations.

Agents should be concerned – will the liability end with Fidelity?

Re-Insider would love to hear your thoughts.

A quick update to the Fidelity settlement story that RE-Insider posted last week:

Fidelity has now also reached a settlement with California district attorneys over unfair competition allegations regarding its TransactionPoint software system.

San Diego County District Attorney Bonnie Dumanis announced that Fidelity National will pay more than $870,000 as part of a settlement with 3 California district attorneys in an unfair competition lawsuit.

The San Diego District Attorney’s Office will receive more than $300,000 from the settlement. San Diego County was co-counsel with the district attorneys of Ventura and Los Angeles Counties in this civil consumer protection judgment, filed in Ventura Superior Court and entered last week by Superior Court Judge Frederick Bysshe.

In the civil complaint filed under California’s Unfair Competition Law, the district attorneys allege that Fidelity operated a TransactionPoint for real estate brokers and other settlement service providers in California that allegedly facilitated unlawful secret payments to the brokers for the referral of business to title insurers and other service providers.

“Consumers deserve the benefits of competition when they buy homes and choose service providers and these secret payments in exchange for referrals violated expectation,” Dumanis said. “We bring enforcement actions like this to ensure that free and fair competition — and not an undisclosed referral payment — determines who provides each real estate settlement service.”

Did you hear? Fidelity just agreed to pay a $1.25M settlement to the state of California for alleged RESPA kickbacks violations. This is the same case that led to a 2011 settlement where Fidelity agreed to pay the federal government $4.5M for the same violations.

The agreement between the California Department of Insurance (CDI) and Fidelity National Title Insurance Company was to resolve allegations of illegal kickbacks paid out from 2003 to 2011.

Between the previous $4.5M settlement with the federal government and this new $1.25M settlement with the state of California, Fidelity and its companies will pay almost $6M, not including legal fees and other costs. But does any of that money help to indemnify brokers who accepted the TransactionPoint payments? After reading what Commissioner Dave Jones said, RE-Insider isn’t so sure.

“Illegal rebates by and to those involved in the home purchasing process compromise the best interests of the consumer,” said Jones.

Commissioner Jones specifically mentions not only those who paid the kickbacks, but those that received the payments. RE-Insider is sure that there are quite a few brokers who are nervous about the next part of the investigation.

RE-Insider will continue investigating whether the terms of this settlement will protect brokers who used the TransactionPoint software.

In the meantime, RE-Insider would love to get your response – what might come next?

Please let us know.

Just one month ago RE-Insider reported that the Michigan Attorney General had issued criminal subpoenas to Lender Processing Services, Inc. (LPS) in reference to “robo-signing” documents that they hadn’t read. On Tuesday, American Home Mortgage Services, Inc. took it one step further and filed a lawsuit against them.

In the suit, American Home Mortgage accuses LPS and its DocX affiliate of improperly signing mortgage documents. The suit alleges more than 30,000 residential mortgages across the country were affected by “improper execution, notarization and recording of assignments of mortgage.”

After more than a year of unsuccessful attempts to recover losses from LPS, American Home Mortgage alleges that LPS first promised to indemnify the mortgage company and then later denied responsibility because their contract with AHM had already expired.

According to a story on Law360.com:

The actions have caused American Home Mortgage to lose millions of dollars on assignments affecting more than 30,000 residential mortgages, the complaint says. The purported surrogate signing has also forced the residential loan servicer to defend itself in litigation across the country and to pay to find and fix robo-signed assignments of mortgage, the complaint says.

Tuesday’s allegations are not the first claims LPS has faced over its alleged surrogate signing. In December, the International Brotherhood of Electrical Workers Local 164 Pension Fund launched a derivative shareholder suit in Delaware Chancery Court over LPS’ alleged encouragement of the surrogate signing of mortgage approvals, in a bid to oust Chairman Lee A. Kennedy and six others from the board of the company.

We’ll have to wait and see how this plays out. In the meantime, agents should continue to beware of who they give business to in this turbulent housing market.

Are Freddie Mac and Fannie Mae unwittingly forcing agents out of their jobs?

Earlier this week, RE-Insider noted that the Obama administration was considering renting out Fannie Mae and Freddie Mac mortgaged homes acquired through foreclosure, essentially taking tens of thousands of homes off the market.

That takes care of many lower-priced homes that agents could otherwise be selling. Now federal rules may be taking pricier homes (with their more lucrative agent fees) off the market through a “one-two punch” of lengthy foreclosures and a reduced federal loan ceiling.

According to an analysis by USA Today, homes priced between $417,000 to $999,999 nationally were delinquent for roughly four months longer than less-expensive homes:

Loans below $417,000 are generally owned by mortgage giants Freddie Mac and Fannie Mae.

Their processes lead to quicker resolution than if loans are held by others. “It’s a much simpler process,” says Jason Kopcak, mortgage loan expert at Cantor Fitzgerald.

Bigger loans, often found on pricier homes, tend to be held by lenders or investors. Banks are “moving the stuff they don’t own first,” to satisfy others and limit litigation, says Paul Miller, analyst at FBR Capital Markets.

To add insult to injury, Fannie Mae and Freddie Mac “conforming” loan limits are scheduled to shrink from $729,750 back to $625,000 after Sept. 30. That means home buyers in higher-priced markets will be forced to search for jumbo loan mortgages from the few banks who offer these types of loans – all at higher rates and fees.

This reduction in the loan limit will dramatically shrink the buying pool and reduce home prices in pricier neighborhoods from San Francisco to New York.

Fortunately, there are legislators who are looking to extend the higher loan limit for the two government-backed mortgage agencies. While RE-Insider agrees this is desperately needed to shore up the struggling housing market – and will help hundreds if not thousands of real estate industry professionals continue to make a living – time is running short.

RE-Insider would like to know your thoughts. Have the feds inadvertently created a rigged game that’s keeping more expensive homes off the market? How will these events impact your business?