PHH Corp. and Realogy Holdings will pay $17 million as part of a class action settlement over alleged kickbacks involving a former joint mortgage venture between the two companies.
The lawsuit, which was originally filed in 2015, accused the companies of violating the Real Estate Settlement Procedures Act by “improperly paying and receiving kickbacks, referral fees, or other things of value in connection with the referral of title insurance and other settlement services.”
The lawsuit claimed that PHH Home Loans, a joint venture between PHH and Realogy that PHH exited last year, was actually a “sham venture carefully engineered to facilitate and disguise the payment of unlawful referral fees and other kickbacks and things of value” to Realogy’s subsidiary, Title Resource Group, and its various subsidiaries.
The lawsuit claimed that PHH Home Loans acted “exclusively” as the mortgage lender for Realogy’s massive real estate brands, which include Coldwell Banker, Sotheby’s International Realty, ZipRealty, The Corcoran Group, and others.
The lawsuit also claimed that PHH had an agreement to refer all title and settlement services to TRG and its subsidiaries.
“In return, PHH received a variety of monetary and nonmonetary referral fees and kickbacks via its ownership and control of the sham (affiliated business arrangement) and PHH’s intricate relationship with Realogy,” the lawsuit claimed.
Both PHH and Realogy deny the claims in the lawsuit, but both agreed to settle the suit nonetheless.
The settlement agreement was originally reached more than a year ago, but the settlement recently received final approval from the court, and payouts to the affected customers will begin soon.
According to the plaintiffs’ legal representation, class members include people who closed on any mortgage originated by PHH Corporation, PHH Mortgage Corporation, PHH Home Loans, or their affiliates (including loans where PHH Mortgage Corporation provided origination services on behalf of any private-label partners) on or after Nov. 25, 2014 and on or before Nov. 25, 2015, and paid title-, escrow-, or closing-related charges in connection with that mortgage loan to Title Resource Group or its affiliates.
“We are very proud of this result which provides class members with cash payments of approximately 17.7% of the title-, escrow-, and closing-related charges they paid in connection with the qualifying mortgage loans, which is an average payment of over $360 to each of the 32,217 class members,” Evan Borges of Greenberg Gross said in a statement.
When contacted by HousingWire, Realogy said that it will not be commenting on the settlement.
PHH, on the other hand, said in a statement that it believes it complied with RESPA in regards to its venture with Realogy.
“In May 2017 we agreed to resolve this matter which was filed in 2015, without admitting liability, in order to avoid the distraction and expense of continued litigation. The final approval of the settlement by the Court is the last step in the legal process,” PHH said in a statement provided to HousingWire.
“We firmly believe we complied with the Real Estate Settlement Procedures Act and other laws applicable to our former joint venture with Realogy,” PHH continued. “Adhering to high legal, regulatory and ethical standards is at the core of how we conduct business, and we remain committed to serving our customers and all of our stakeholders consistent with that principle.”