Prospect Mortgage will pay the Department of Housing and Urban Development $3.1 million to settle claims of kickbacks to mortgage professionals from the company’s alleged “sham joint ventures.” This week, Fidelity National Financial agreed to pay HUD $4.5 million to settle kickback claims. HUD said Prospect created hundreds of these joint ventures to share profits with lenders, servicers, real estate agents and brokers for the referral of these services. These arrangements allegedly allowed nonapproved offices to originate mortgages backed by the Federal Housing Administration. HUD said the FHA never authorized this business structure, and said it was in violation of the Real Estate Settlement Procedures Act. “The real test for any bona fide affiliate business arrangement is whether the affiliate has sufficient capital and employees to stand on its own two feet,” said new Acting FHA Commissioner Carol Galante. “In this case, it was clear that these sham companies had neither and were merely sharing profits for the referral of business.” According to the agreement, Prospect denied the allegations and claimed it disclosed the business structure to HUD in a previous audit. Prospect said it assumed the business structure did not violate RESPA because of this disclosure. HUD said these companies, however, had little to no employees, capital or offices. Prospect agreed to dissolve these ventures immediately along with paying the settlement. Write to Jon Prior. Follow him on Twitter @JonAPrior.
Prospect Mortgage settles with HUD in another kickback case
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