“Honesty is the best policy – when there is money in it.” – Mark Twain Would you be surprised to learn that Fannie Mae employees are selling REOs listings to brokers for kickbacks? Investigators are examining whether soliciting illegal payments is a common practice at Fannie Mae’s Irvine, California office. Shouldn’t the office of Fannie…

Three people face charges for their role in an alleged fraud scheme by using the Internet to target struggling homeowners in Northern California.

Ronald Cupp, 58, of Santa Rosa, Randall Heyden, 69, of San Rafael and Angelle Wertz, 38, also of Santa Rosa were arrested on 57 charges including theft, forgery, notary fraud and recording of false documents, Attorney General Kamala Harris announced on Monday.

The three are accused of luring the homeowners through six websites, including “wekillyourmortgage.com” and collected thousands of dollars in upfront fees ranging from $1,000 to $10,000.

The scam ran through Cupp’s mortgage company—North Bay Trust Services—the three created fraudulent documents that only delayed a homeowner’s foreclosure, but did not satisfy the preexisting mortgage debt to the original lender.

“Vulnerable California homeowners thought they were working to save their homes but were actually the victims of a fraudulent scheme,” Harris said in a statement. “Today, it’s not enough to dismantle the brick-and-mortar aspect of a criminal operation; we need to shut down criminal operations in cyberspace as well.”

Prosecutors in Marin and Sonoma counties received a tip about the scam, said Nick Pacillo, a spokesman at the AG’s office. It is not known how many people have been victimized as state prosecutors are hoping more will come forward.

Cupp, Heyden and Wertz did not enter pleas during their appearance in Sonoma County Superior Court on Monday. Cupp and Heyden are being held in the Sonoma County jail on $500,000 and $75,000 bail, respectively.

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.

One of RE-Insider’s goals has always been to educate real estate agents about the possible pitfalls they negotiate daily.

Perhaps the biggest issue we’ve tackled has been RESPA compliance – especially for real estate agents.
RESPAnews recently came out with an in-depth story on how important it is for real estate agents to understand RESPA laws. Some highlights of the article are below:

With all the talk about new disclosure forms and servicing regulations, it may seem like RESPA is only an issue for lenders, closing agents and mortgage loan servicers. That is not the case. Real estate agents also need to be wary of RESPA.

“I would say the biggest concern is the huge changes to the closing documents and closing process,” Ken Trepeta, director of real estate services at NAR said. “We are very concerned that there will be much confusion and many delayed closings if the proposal is not fundamentally altered. In fact, we are advocating they drop the back end changes almost completely and focus on getting the upfront disclosure, [the Loan Estimate], right.”

The Consumer Financial Protection Bureau (CFPB) took over the regulation of RESPA in July 2011, and it appears the bureau is taking RESPA violations seriously. They’ve reopened a U.S. Department of Housing and Urban Development (HUD) investigation involving kickbacks and captive reinsurance. Recently, the bureau declined to set aside a civil investigative demand by one of the companies under investigation.

It’s clear that RESPA violations should not be taken lightly and that the CFPB is picking up right where HUD left off.
With all the talk about new disclosure forms and servicing regulations, it may seem like RESPA is only an issue for lenders, closing agents and mortgage loan servicers. That is not the case. Real estate agents also need to be wary of RESPA.

Remember, a RESPA violation carries significant consequences. A RESPA violation could mean receiving a fine of up to $10,000 for each offense and could include imprisonment for up to one year. In some cases, RESPA allows for a private cause of action, permitting the consumer to sue the violator for three times the amount the buyer paid for the settlement service.

To avoid a Consumer Financial Protection Bureau investigation, it’s best to review your interactions with other settlement services providers and make sure that you are RESPA compliant.