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HUD Settles Case Against Atlanta-Based Lender And Broker Accused Of Phony Hiring Of Real Estate Agents
Sham "employees" did little or no work for referral fees
WASHINGTON - The Department of Housing and Urban Development today announced a settlement agreement with Atlanta-based lender, Znet Financial, involving alleged violations of the Real Estate Settlement Procedures Act (RESPA). In addition, real estate broker ReMax of Atlanta, certain of their officers and affiliated companies, and 14 ReMax real estate agents agreed to the settlement after HUD determined all violated the anti-kickback and unearned fee provisions of RESPA.
RESPA prohibits kickbacks for the referral of real estate settlement business as well as the giving and receiving of a portion of real estate settlement charges for which no services are performed. A HUD investigation found Znet paid ReMax of Atlanta real estate agents as "employees" even though the agents performed little or no work for the lender.
"RESPA is very clear that creating the illusion of employment to mask otherwise illegal referral fees is not permitted," said John C. Weicher, HUD Assistant Secretary for Housing - Federal Housing Commissioner. "Real estate agents, brokers and lenders should know that they will be held accountable for kickbacks and unearned fees."
HUD's investigation found that Znet represented the ReMax of Atlanta agents as "employees," paying them $400 for each consumer referred to Znet. The real estate agents are actually "sham employees" after investigators found the agents performed little or no origination work other than filling out loan application forms.
Under the terms of the settlement, the companies, their officers and the real estate agents agreed to stop this bogus employee compensation program. Further, the ReMax agents will refund $400 to each consumer referred to Znet for a total of $9,200. In addition, Znet will make a settlement payment to the U.S. Treasury of $15,000.
Equity skimming is a type of scam
In this type of scam, a "buyer" approaches you, offering to get you out of financial trouble by promising to pay off your mortgage or give you a sum of money when the property is sold. The "buyer" may suggest that you move out quickly and deed the property to him or her. The "buyer" then collects rent for a time, does not make any mortgage payments, and allows the lender to foreclose.
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Definition:
Federal Home Loan Mortgage Corporation (FHLM); a federally-chartered corporation that purchases residential mortgages, securitizes them, and sells them to investors; this provides lenders With funds for new homebuyers.
Federally Assisted Projects
Definition:
A federally assisted project is one which receives Federal reimbursement or payment of some project expenses such as planning, construction, right-of-way acquisition, and property management.
Interest rate
Definition:
The amount of interest charged on a monthly loan payment; usually expressed as a percentage.
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