The U.S. Department of Housing and Urban Development is fighting accusations Thursday from some in the mortgage banking industry that claim it engaged in “illegal kickbacks” to brokers as part of an incentive program designed to boost FHA origination volume. The now-defunct pilot program paid brokers $500 dollars to steer HUD-eligible buyers into FHA-insured loans, a paid incentive that the Michigan Mortgage Brokers Association said Thursday violated the Real Estate Settlement and Procedures Act. Via the Detroit Free Press:

Last week, HUD stopped the 3-month-old program, which offered $500 bonuses to real estate brokers who got HUD home buyers into Federal Housing Administration (FHA) home loans, after Bloomfield Hills attorney Howard Lax contacted HUD and claimed the program was an illegal kickback. … Pava Leyrer, legislative chair for the Lansing-based Michigan Mortgage Brokers Association, also said she believes the program was illegal. The program served several states, including Michigan, which has more than 2,100 HUD homes in Wayne, Oakland, Livingston, Monroe and Washtenaw counties. Roughly 1,300 of those are in Detroit, said Nathan Boji, a real estate agent with Re/Max Classic in Farmington Hills and HUD’s listing agent in those counties.

HUD spokespersion Brian Sullivan is quoted as denying the allegations that the program was illegal, but said that HUD had awarded the $500 bonus to about 200 brokers since November, according to the story. He’s quoted as characterizing the program as “inappropriate.” Those interviewed by the Free Press said that they believe HUD had good intentions with the program; but Audrey Acquisti, president of the MMBA, notes:

“If anyone should know those laws,” Acquisti said, “it would be HUD.”