to $1.6 million in settlements with a national mortgage lender (CitiMortgage, Inc. and its captive title

reinsurance company) and two major homebuilders that engaged in business practices involving

captive title reinsurance. In an accompanying press release, HUD Assistant Secretary for Housing

Brian D. Montgomery stated flatly, “There is almost never any legitimate need or business purpose

for title reinsurance on a single-family residence. HUD will continue to work with the states to

investigate captive arrangements to make certain that they aren’t created for the purpose of obscuring

referral fees.” See Chapter 8.

Boston-area kickbacks.On September 6, HUD announced two enforcement actions that followed up

on November 2005 HUD and FDIC settlements involving allegations that 1-800-East-West Mortgage

Co. requested or received kickbacks for the referral of settlement service business. In one settlement,

a real estate closing attorney paid $15,000 to settle charges that he had bought sporting event tickets

and restaurant gift certificates to promote referrals of loan closings to his firm. In the second, HUD

determined that an appraisal firm had paid kickbacks to East-West and its employees in the form of

restaurant gift certificates. “[W]e will continue to take a hard line against these sorts of artificial

influences on the cost of buying or refinancing a home mortgage, whether from those who pay or

receive referral fees in violation of RESPA,” said Montgomery. See Chapter 8.

Captive reinsurance, round two.On October 12, HUD announced three additional settlements

involving captive title reinsurance practices, in this case with three homebuilders: Shea Homes, Inc.,

and its captive title reinsurance company ($950,000), William Lyon Homes and its captive title

reinsurance company ($850,000), and Fulton Homes ($150,000). “We’ve taken a long hard look at

captive title reinsurance and see almost no legitimate purpose for it when it comes to single-family

homes,” said Montgomery. See Chapter 8.

Illinois Sham Affiliate Business Arrangement Guidance.The Illinois Division of Financial

Institutions distributed a handout describing its efforts to clamp down on sham business arrangements

set up by title insurance companies. See Chapter 8.

Nevada captive reinsurance settlement.On May 31, the Nevada Division of Insurance reached an

agreement with LandAmerica Financial Group, Inc. The settlement stemmed from allegations that

LandAmerica had ceded a percentage of title insurance premiums to captive reinsurance companies to

negotiate illegal rebates to banks, builders, and real estate agents and to steer business back to the title

companies. See Chapter 8.

California captive reinsurance settlement.On August 1, the California Department of Insurance

announced that it had reached a settlement agreement requiring Orange Coast Title Company to pay

$800,000 and immediately cease giving illegal inducements to generate more business. See

Chapter 8.

Colorado captive reinsurance settlement.On August 23, the Colorado Division of Insurance

announced that it had reached a settlement with LandAmerica Financial Group over captive

reinsurance arrangements. See Chapter 8.

Erroneous mortgage broker fee.A federal district court in Michigan dismissed an action alleging

that a lender had violated Section 8 by inadvertently paying a fee to a mortgage broker who

sometimes acted as a secondary market broker but on this occasion had acted as an intermediary

broker. The broker had returned the fee when the error was discovered.

High discount points.A federal district court in Tennessee granted summary judgment to a lender

regarding a borrower’s claim that it had violated Section 8 by charging a 4 percent loan discount fee.

Mark-ups.A federal district court in Ohio rejected a borrower’s claim that a $65 credit report fee had

violated Section 8(b) because the fee exceeded the defendant’s cost and the defendant kept the

difference.

Overcharge not necessary.A federal district court in Pennsylvania held that a plaintiff need not

allege that she has been overcharged for settlement services in order to bring a private right of action

under Section 8.

Sham AfBAs.A federal district court in Maryland examined a group of alleged sham affiliated

business arrangements.

RESPA Web site Complaint Questionnaire.HUD’s plan to launch the “RESPA Web Site

Complaint Questionnaire,” first unveiled on November 8, 2005, is moving forward. HUD announced

in the Nov. 7 Federal Register that it will submit the plan to the Office of Management and Budget

(OMB) for review. HUD pointed out, however, that the proposal has sparked concern by two trade

groups, the American Land Title Association (ALTA) and the National Association of Mortgage

Brokers (NAMB). Although both expressed support for increased enforcement of RESPA, they

voiced concern that the Web site could lead to improper investigations. ALTA said the Web site

an investigation.”

HUD considers additional RESPA guidance.HUD’s efforts to improve compliance with RESPA

go beyond its ongoing enforcement crackdown and its RESPA reform initiative. HUD general

counsel Keith Gottfried revealed during industry gatherings in June and October that HUD staffers

were working on improving “regulatory transparency” by issuing additional compliance guidance.

These documents may include staff legal bulletins and “no action” letters. (Gottfried resigned in

October.)

RESPA reform still under wraps.Although RESPA reform remains part of HUD’s regulatory

agenda, Department officials have become decidedly mum about when HUD will take another stab at

issuing a proposal. It’s now been almost three years since HUD officials withdrew an earlier version

in response to opposition from key Congress members and industry trade groups. In its latest

semiannual agenda, which appeared in the December 11 Federal Register, HUD classified RESPA

reform as a “long term action” and in lieu of an anticipated date for its next action wrote the word

“undetermined.”

New York attorney disbarred.On May 9, the Supreme Court of the State of New York, Appellate

Division: Second Judicial Department, issued an opinion and order disbarring a New York attorney

for violating Section 8(b) of RESPA. The attorney had accepted payments from a title insurance

company in exchange for which he had provided no services.