Law enforcement officials have just confirmed that a HUD/RESPA complaint filed by certain Richardson Residents involving locally-based Grand Texas Homes, Inc. (GRAND) and its captive builder-controlled title company, Grand Title Company, LLC (GTC) involving illegal real estate settlement-related practices was successful. The complaint and ensuing investigation focused on selling, marketing, affiliated business disclosures, required title service provider practices and sales agreement provisions, and related business referral/kick-backs involving federally-related mortgage transactions associated with the Enclave of Breckinridge development in northeast Richardson. As the lead HUD/RESPA investigator in Washington, D.C. remarked when critical additional documents were provided by the two lead complainants, YOUVE MADE OUR CASE.
The following is a summary news release of the case, along with an attached copy of the actual settlement agreement, with the two main violations cited by HUD being: 1) Section 8(a) which prohibits the giving and accepting of any fee, kickback, or thing of value pursuant to an agreement or understanding; and, Section 9(a) of RESPA which prohibits the seller of a property that will be purchased with the assistance of a federally-related mortgage from requiring directly or indirectly, as a condition to selling the property, that the title insurance covering the property be purchased by the buyer from any particular title company.
HUD Settles Alleged Sham ABA Case http://mortgagelawblog.com/?cat=78
The Department of Housing and Urban Development has posted a new settlement on its website, alleging violations of the Real Estate Settlement Procedures Act of 1974. (HUD Settlement Website Link: http://www.hud.gov/offices/hsg/ramh/res/respa_hm.cfm )
The settlement is between HUD, Grand Texas Home, Inc., its owners and officers, and Grand Title Company.
As its core allegations under the settlement, HUD generally states:
Grand Title did not operate as a bona fide independent title agency,
Grand Homes failed to provide consumers with the required ABA disclosures, and
Grand Homes required consumers to use its affiliate, Grand Title.
The defendants agreed to pay HUD $200,000.
Certain language from the settlement is of particular note. For example, the agreement expressly permits Grand Homes to select the title insurer so long as Grand Homes pays the title costs. While this language appears in the pertinent regulatory provisions, certain persons at HUD sometimes argue that payment of the title costs is not sufficient, because the costs generally are backed into the home prices.
The agreement also sets forth a laundry list of items that HUD presumably views as undermining the bona fides of an affiliated title company.
Along with no restitution being made to the victims, the inclusion of a consumer-unfriendly settlement provision allowing GRAND to continue selecting the title insurer if it pays the title policy cost with proper disclosure thereof, which as noted above will most likely be buried into the cost of the home and with the understanding that most buyers fail to read or fully comprehend the negative implications of a builder effectively issuing a title policy on a home and property it has developed, the settlement failed to include or mention Chicago Title Insurance Company (CTIC) which partnered with GTC in this alleged sham title operation. CTIC has an extensive enforcement history with HUD and the State of Texas Department of Insurance (TDI), per the attached major settlement where CTIC paid a $5 million fine involving Section 8(a) violations for referral of business in violation of the anti-kickback provisions and Section (4) violations involving inaccurate HUD-1 closing statements and a separate but related $1.2 million fine paid to TDI for improper land flip transactions, inaccurate HUD-1 closing statements and numerous other violations of the Texas Title Manual: https://wwwapps.tdi.state.tx.us/inter/asproot/commish/da/searchdb2005.asp
Real estate in Texas is big business, and these widespread illegal practices may help explain why the State of Texas has the highest average title policy costs in the U.S. per the most recent year-end 2009 statistics at $3,855 vs. the national average of $2,732, a difference of $1,132 or 41.1%: http://www.bankrate.com/finance/mortgages/texas-tops-2009-closing-cost-exclusive.aspx
As the old adage goes, LET THE BUYER BEWARE, and that would especially be the case in choosing what builder and title companies that you deal with in terms of how they transact business and what their prior enforcement action histories are and the amount of title/closing costs youre being charged vs. the competition. While investigations continue into other related suspected illegal activities, our hats go off to these fellow Richardson Residents in a small but important step in their ongoing efforts to expose corporate fraud and unseat government corruption at all levels.