PA AG Sues Mortgage Brokers for Alleged Kick-Backs

Pennsylvania’s Attorney General recently filed suit against multiple mortgage brokerages and their common owner, alleging that these defendants gave things of value—including event tickets, expensive dinners, and disproportionate stock distributions—to real estate professionals in exchange for mortgage referrals.  These actions, the lawsuit alleges, were violations of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law, the federal Consumer Financial Protection Act, and the Real Estate Settlement Procedures Act (RESPA)/Regulation X.

Among other claims, the AG alleges that the defendants offered only real estate professionals the option to purchase specific stock in the defendant companies, and that the quarterly stock distributions from those companies were significantly higher than the price that the real estate professionals had paid for their stock ownership.  The suit further alleges that the stock payments were based on actual and anticipated referrals because the real estate professionals’ stock shares could be terminated if they did not refer a sufficient number of borrowers, and those terminated shares could allegedly be reallocated to another real estate professional based on higher referral volume.  The alleged stock price discount, and the alleged understanding that these stocks were in exchange for referrals, were a “thing of value” given for a referral in violation of Section 8 of RESPA, according to the AG.

Additionally, the suit alleges that the defendants violated RESPA by failing to provide, or ensure consumers were provided, required affiliated business arrangement disclosures.