Make us your home page
Instagram

The Nation's Housing: Are kickbacks making a comeback?

Kickbacks rearing their heads again

WASHINGTON — A settlement between the federal Consumer Financial Protection Bureau and a Texas homebuilder is drawing renewed attention to a controversial issue that was prominent during the years preceding the housing bubble: kickbacks in home real estate transactions. Put another way, do you know where your money is really going when you pay thousands of dollars in loan fees and closing charges? Is your Realty broker or builder getting an extra piece of the action through side deals with lenders or title agencies — all at your expense through higher charges?

The CFPB's allegations in its case against Dallas-based Paul Taylor Homes Ltd. illustrate how these arrangements can work: According to the settlement, the builder created partnerships with two lenders — one a bank, the other a mortgage company. In reality, however, according to the CFPB, "both entities were shams" designed to funnel kickbacks to Taylor for referrals of home purchasers needing mortgages.

Though the partnership entities had names — Stratford Mortgage Services and PTH Mortgage Co. — and appeared to be the funding sources for the loans, they in fact were shells with no separate employees, office space or real substance, the CFPB alleged. They did not advertise their mortgage businesses to the general public, instead servicing only Taylor purchasers.

Paul Taylor Homes denied any wrongdoing as part of the settlement. Asked for comment for this column, a lawyer for Taylor Homes, Van Shaw, said Taylor "has chosen to settle this matter to avoid the expense of potentially extended litigation with the government. The company now considers the matter closed." As part of the settlement, Taylor must pay the federal government $118,194, the amount of money the builder received from the alleged kickback scheme starting in 2010.

This was the second such case the CFPB has settled in the past two months. In April, the agency fined four large mortgage insurance companies — Mortgage Guaranty Insurance Corp., Radian Guaranty Inc., Genworth Mortgage Insurance Corp. and United Guaranty Corp. — a total of $15.4 million for alleged illegal kickbacks to lenders. The under-the-table payments, said CFPB Director Richard Cordray, "inflated the financial burden of homeownership for consumers" by raising their mortgage premium charges. The firms admitted no wrongdoing as part of their settlements.

Many large real estate brokerages and homebuilders have affiliate tie-ins and are required to disclose their existence to clients and advise them that they have other choices for services. Industry proponents of these arrangements argue that they provide faster, more reliable service in transactions at a fairer cost than can be achieved by consumers going out and shopping on their own.

But critics such as Doug Miller, executive director of Consumer Advocates in American Real Estate (CAARE), dispute this. He argues that tie-ins often squeeze out service providers who choose not to affiliate with a big firm or builder, reduce competition and raise costs to consumers.

His advice to home buyers: Always shop for title insurance and settlement service alternatives to the in-house deals you're offered. Ask your agent to help you shop beyond the affiliation network. Agents have a duty to help you get the best deals and best service, and they often know where they are.

The Nation's Housing: Are kickbacks making a comeback?

06/01/13 [Last modified: Thursday, May 30, 2013 1:03pm]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, Washington Post - Writers Group.
    

Join the discussion: Click to view comments, add yours

Loading...
  1. Tampa Club president seeks assessment fee from members

    News

    TAMPA — The president of the Tampa Club said he asked members last month to pay an additional assessment fee to provide "additional revenue." However, Ron Licata said Friday that the downtown business group is not in a dire financial situation.

    Ron Licata, president of the Tampa Club in downtown Tampa. [Tampa Club]
  2. Under Republican health care bill, Florida must make up $7.5 billion

    Markets

    If a Senate bill called the Better Care Reconciliation Act of 2017 becomes law, Florida's government would need to make up about $7.5 billion to maintain its current health care system. The bill, which is one of the Republican Party's long-promised answers to the Affordable Care Act imposes a cap on funding per enrollee …

    Florida would need to cover $7.5 billion to keep its health care program under the Republican-proposed Better Care Reconciliation Act of 2017.  [Times file photo]
  3. Amid U.S. real estate buying binge by foreign investors, Florida remains first choice

    Real Estate

    Foreign investment in U.S. residential real estate recently skyrocketed to a new high with nearly half of all foreign sales happening in Florida, California and Texas.

    A National Association of Realtors annual survey found record volume and activity by foreign buyers of U.S. real estate. Florida had the highest foreign investment activity, followed by California and Texas. [National Association of Realtors]
  4. Trigaux: Tampa Bay health care leaders wary of getting too far ahead in disruptive times

    Business

    Are attempts to repeal Obamacare dead for the foreseeable future? Might the Affordable Care Act (ACA), now in dire limbo, be revived? Will Medicaid coverage for the most in need be gutted? Can Republicans now in charge of the White House, Senate and House ever agree to deliver a substitute health care plan that people …

    Natalia Ricabal of Lutz, 12 years old, joined other pediatric cancer patients in Washington in July to urge Congress to protect Medicaid coverage that helped patients like Ricabal fight cancer. She was diagnosed with Ewing's sarcoma in 2013 and has undergone extensive treatments at BayCare's St. Joseph's Children's Hospital in Tampa. [Courtesy of BayCare]
  5. The Iron Yard coding academy to close in St. Petersburg

    Business

    ST. PETERSBURG — The Iron Yard, a code-writing academy with a location in downtown St. Petersburg, will close for good this summer.

    Instructors (from left) Mark Dewey, Jason Perry, and Gavin Stark greet the audience at The Iron Yard, 260 1st Ave. S, in St. Petersburg during "Demo Day" Friday, Oct. 7, 2016, at The Iron Yard, which is an immersive code school that is part of a trend of trying to address the shortage of programmers.  The academy is closing this summer.  [LARA CERRI   |   Times]