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Brokerage conglomerate Realogy and mortgage provider PHH Corporation will pay $17 million to settle a class action lawsuit alleging a years-long kickback scheme.
The settlement, recently approved by a California judge, stems from a 2015 lawsuit that accused Realogy and PHH of funneling title insurance business to Title Insurance Group, a Realogy subsidiary.
They did so through a business called PHH Home Loans, which facilitated the arrangement in violation of the Real Estate Settlement Procedures Act (RESPA), a 1974 law aimed at protecting homeowners from such schemes.
According to the lawsuit, the groundwork for the scheme was laid in 2005 when Realogy was spun off from its predecessor, Cendant Corporation. That year, Cendant also spun off its mortgage business, which became PHH. But PHH and Cendant then entered a series of agreements to maintain close business ties.
“When thoroughly analyzed and stitched together, this seemingly disparate set of corporate-level commitments, preferences, exclusivities, and referrals… had the design and effect of guiding and pushing unwitting consumers through the home-buying process in a manner that caused the consumers not to use competing settlement service providers,” the plaintiffs argued.
For one thing, PHH had a strategic relationship agreement with Realogy in which PHH was bound to refer all title insurance and settlement services to Title Resource Group. “In return, PHH received a variety of monetary and nonmonetary referral fees and kickbacks,” court documents said. Meanwhile, PHH was exclusively recommended as a mortgage lender via Realogy’s brokerage network, including Coldwell Banker, Sotheby’s International Realty, ZipRealty, the Corcoran Group and Citi Habitats.
In a statement, Evan Borges, an attorney for the plaintiffs, called the outcome “tremendous” and said, “This was a hard-fought case every step of the way.”
Under terms of the settlement, which was agreed to last year, each class member will receive 17.7 percent of the title, escrow and closing costs they paid — averaging $360 for the 32,217 members. The plaintiff’s attorneys will also receive up to 30 percent of the settlement amount, or $5.1 million.
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