Based on an investigation by HUD beginning more than two years ago, the CFPB filed a complaint in the United States District Court for the Western District of Kentucky against a law firm that provides settlement services alleged to have violated the Real Estate Settlement Procedure Act’s provisions prohibiting kickbacks. Section 8 of RESPA generally prohibits kickbacks and fees or anything of value in exchange for referring customers for settlement services involving federally related mortgage loans. According to the complaint, the law firm operated a network of 9 affiliated shell companies (with no office locations or company-specific contact information) as joint ventures with local real estate brokers. The broker would allegedly refer the buyer to the law firm for closing or settlement services, and the law firm would in turn arrange for the joint venture to issue title insurance—while perform all the title work itself. The conduct occurred from 2006 until 2011, when the law firm dissolved the joint ventures upon receipt of a notice of pending investigation from HUD. The CFPB is seeking to permanently enjoin the law firm from creating or entering into new affiliated business arrangements or from distributing any remaining funds from its title insurance company, among other things. The CFPB is also asking the court to order disgorgement of all income, revenue, proceeds or profits received.
IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this informational piece (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.
