NY, OH and MN Make RESPA Enforcement Announcements: Is This a Trend to Watch?
In the past several weeks, three states with little in common have reported on RESPA-related enforcement activities ranging from prior fines and punishment to admonishing licensees about rules on inducements. To keep you informed, we take these in order to provide you the latest:
In March, the Minnesota Commerce Commissioner announced that the Commerce Department had fined Liberty Title, Inc. $45,000.00 for a kickback scheme in which the real estate agent allegedly steered nearly all of his clients to the title company in exchange for valuable perks for himself. The Commerce Department also fined the real estate agent involved in the arrangement the sum of $5,000.00.
The Commerce Department alleged Liberty Title provided the realtor with numerous free meals, hotel accommodations in San Francisco and other perks between July 2014 and 2015. Those referral rewards and other payments resulted in the enforcement action.
In 2015, the Minnesota Commerce Department took similar action against TitleSmart, a local title insurance company that hosted wine-and-dine boat cruises with real estate agents and mortgage lenders to get their clients' referral business.
This week, the Minnesota Star-Tribune ran an interesting expose on the Commerce Department "crackdown" on kickbacks in the real estate settlement services industry in Minnesota. Click here to read that article.
This month, state regulators in New York have taken formal steps to address what they say are "widespread abuses in the title insurance industry" that were first investigated back in 2012. The State Department of Financial Services (DFS) published proposed rules:
The first proposed rule seeks to prohibit the giving of inducements to lawyers, lenders and others who may aware title insurance business at closings in return for referral rewards or other compensation. The 2012 investigation found that the practice of giving inducements in the form of meals, entertainment, gifts and vacations had flourished.
The second proposed rule expands the fiduciary duties of title insurance companies and their agents, and adds new and more detailed disclosure requirements about their sources of compensation.
The regulations will take effect in 45 days unless the DFS substantially alters them. The DFS invites comments on the first proposed regulation to: Ellen Buxbaum, New York State Department of Financial Services, One State St., New York, NY 10004; or to TitleInsReg@dfs.ny.reg.
It invited public comment on the second proposed rule to: Paul Zuckerman, New York State Department of Financial Services, One State Street, New York, N.Y., 10004; or to firstname.lastname@example.org.
Towards the end of April, the Ohio Department of Insurance (ODI) sent out an email to all licensed title agencies and agents in the state. The purpose of the reminder was to advise licensees that ORC 3933.01 and ORC 3953.26 both prohibit giving valuable consideration for the inducement of business. The reminder cited to Bulletin 2009-13 and Bulletin 95-3, which are both linked below:
The state of Ohio has had a spotty history of enforcing the inducements language of the above-cited materials. For instance, Bulletin 95-3 states that a "stock dividend" is an impermissible "thing of value," yet the ODI permits affiliated business arrangement title agencies to pay stock dividends to real estate referral sources who also own interests in the affiliated title company.
While the e-mail reminder is not an enforcement action, it admonishes licensees that they have the jurisdiction to do so. It remains to be seen if they actually do.
If your state is making similar rumblings about RESPA enforcement, let us know. Contact us at email@example.com today. We can help.
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