LOS ANGELES (CN) – Fidelity National Title Insurance and other major title insurers illegally kicked back fees to real estate agents for real estate settlement services, homeowners claim in a federal class action.
Lead plaintiff Matthias Hildebrandt says lead defendant Fidelity National Financial Inc. settled with the U.S. government in 2011 for violating the Real Estate Settlement Procedures Act (RESPA). RESPA protects homebuyers by prohibiting kickbacks and fees for real estate settlement services in federal backed mortgage loans.
The class claims that Fidelity ran the scheme using a web-based platform called TransactionPoint, which “allowed kickbacks and referral fees to be disguised as ‘sublicense fees’ or ‘access fees.'”
“Through TransactionPoint, agents or brokers selected real estate settlement service providers for real estate transactions and, in turn, real estate brokers and agents entered into standard form sublicensing agreements with vendors, including defendants, to enable the vendors to be listed and selected through TransactionPoint as service providers for the transaction,” the complaint states.
Fidelity paid predetermined fees for each referral, but real estate agents and brokers “performed no bona fide work for the fees,” according to the complaint.
“In short, the scheme allowed defendants and participating real estate agents and brokers to camouflage illegal kickbacks and referral fees as sub-license payments,” the complaint states.
For a home warranty policy, a kickback was up to one-fifth of the premium, while a kickback for a title insurance policy was $100 per policy, the complaint states.
The class claims Fidelity paid millions of dollars in kickbacks and referral fees, to “hundreds, if not thousands” of real estate agents and brokers.
The homebuyers claim Fidelity evaded federal and state regulators for years, until the U.S. Department of Housing and Urban Development investigated it in 2009.
Last year, HUD reached a $4.5 million settlement with Fidelity, which announced that it was terminating TransactionPoint fee payments.
The class claims that part of the fees they paid were used to pay kickbacks, which inflated the cost of settlement services.
Also named as defendants are Commonwealth Land Title Co., Chicago Title Co., Ticor Title Co. of California, Lawyers Title Co., Fidelity National Disclosure Source LLC, and Fidelity National Home Warranty Co.
The class is represented by Keith Cochran with Chapin Fitzgerald Sullivan & Bottini of San Diego.
The 42-page complaint includes another 154 pages of exhibits.
The class seeks restitution and treble damages for RESPA violations.
Fidelity did not immediately respond to an emailed request for comment.