HUD Settles Kick-Back Case With 9 Memphis Home-Builders
Jan 7, 2006 

MEMPHIS - Nine Mid-South home-builders will pay the federal government $226,000 to settle a three-year long dispute over an alleged kick-back scheme, according to a spokesperson for the U.S. Department of Housing and Urban Development.

The settlement says the builders entered into a business arrangement with First American Title Insurance Company, operating as Memphis Title Company at 6077 Primacy Parkway, in 2002. HUD spokesperson Brian Sullivan says the builders received cash payments from the mortgage title insurance company in exchange for referring customers to Memphis Title, a violation of the federal Real Estate Settlement Procedures Act (RESPA).

"Whether it is over-the-table or under-the-table, exchanging anything of value for the referral of business artificially drives up the cost of mortgage transactions on consumers, and that is not right," says Sullivan. "This is against the law."

The builders, representing a group called Title Group Builders, include:

* Oaktree Homes, LLC

* Vintage Homes, LLC

* Bronze-Christian, LLC

* P&G Capital Partners, LLC

* Summit Homes, LLC

* Lenox Homes, LLC

* Riverbirch Homes, LLC

* Richard & Milton Grant Company

* Downing Homes

Lisa Reid, president-elect of the Tennessee Mortgage Bankers Association, says no consumers were harmed in the builders' arrangement with First American/Memphis Title. She says mortgage title insurance fees are set by the state, so any consumer loans in the deal would have shared the same premiums. But Reid says Congress passed the law to prevent mortgage companies and builders from eliminating the competition for home-buyers' business.

"For instance, if the consumer didn't get the best price because you were induced to send your loan to a certain mortgage company and didn't get the options to shop for the best price," Reid says.

Of the nine builders, 3 On Your Side was able to reach four of them. Stephen Hodgkins, owner of Oaktree Homes at 1630 Bonnie Lane in Cordova, insists the arrangement was a legal investment venture, not a kick-back scheme. "All we did was openly invest in a title company," he says. "I don't understand why we were the ones (HUD) focused on. We did nothing wrong. It was legal."

"Any buyers that we dealt with, we notified them exactly what was happening," says Milton Grant of Richard & Milton Grant, LLC, at 1655 International Drive. "The Justice Department is trying to frame it a different way."

"No home-owner or home-buyer was ever affected at all," says Jimmy Neal, owner of Summit Homes, 1220 Big Orange in Cordova.

Mary Alisandratos, corporate counsel for First American Title Insurance Company/Memphis Title Company, declined to comment for this story. The company settled its portion of the case with HUD in July, according to a HUD press release.

Hodgkins says the builders opted to settle with HUD to avoid the cost of a lengthy litigation. In addition to the fine, the builders had to dissolve their business ties with First American Title Insurance Company.