PHH Corporation and Realogy have agreed to pay $17 million to end a putative class action accusing them of arranging kickbacks for unlawful referrals of title services. PHH, Realogy Group LLC and various affiliates were accused of violating the Real Estate Settlement Procedures Act (RESPA) with a scheme to illegally funnel business to Title Resource Group, which is a Realogy subsidiary. The Plaintiffs accused the Defendants of creating an affiliated business arrangement, dubbed PHH Home Loans, to facilitate the exchange of unlawful referral fees and kickbacks. A motion for preliminary approval of the settlement was filed.

The proposed settlement class consists of borrowers who closed on any mortgage loan originated by PHH between Nov. 25, 2014, and Nov. 25, 2015, and paid any title, escrow or closing charges to Title Resource Group. More than 32,000 transactions fall within the settlement class definition, according to the motion for preliminary approval. The suit, filed in November 2015, alleged that PHH entered a strategic relationship agreement with Cendant Corporation, a former parent of both PHH and Realogy, requiring certain business exchanges that violated RESPA.

The Plaintiffs claimed that PHH was bound to refer all title insurance and settlement services to Title Resource Group in exchange for referral fees and kickbacks funneled through PHH Home Loans. The agreement also made PHH Home Loans the exclusively recommended mortgage lender for Realogy’s real estate brokerage network, according to court documents.

The Plaintiffs also claimed that PHH unlawfully directed various banking institutions to refer title insurance and other settlement services to Title Resource Group and its affiliates without telling consumers that PHH had an affiliation with the title company. Nor, according to the Plaintiffs, did consumers know that PHH was required to make banks refer the business to Title Resource Group.

The RESPA bans the payment or acceptance of “any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person.”

In their motion for preliminary approval, the Plaintiffs said continuing with litigation risked the Defendants’ moving for summary judgment or challenging class certification. Conversely, other RESPA settlements support a finding that this settlement is fair, adequate and reasonable, the motion said, citing six other settlements that ranged between $4 million and $34 million. “The settlement thus confers an excellent recovery for Plaintiffs and the putative class,” the motion said.

It should be noted that PHH had agreed to pay almost $75 million in a settlement with the U.S. Department of Justice over claims that it originated mortgages backed by different federal agencies that didn’t meet requirements for federal guarantees.

The Plaintiffs are represented by Daniel S. Robinson and Wesley K. Polischuk of Robinson Calcagnie Inc. and Wayne R. Gross and Evan C. Borges of Greenberg Gross LLP. The case is Timothy L. Strader Sr. v. PHH Corporation et al., (case number 8:15-cv-01973) in the U.S. District Court for the Central District of California.

Source: Law360.com



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