Pulte, other builders settle kickback claims
Pulte Homes Inc. and KB Home are among six home builders that agreed to pay a total of $1.4 million to settle federal investigations into whether they accepted rebates from insurers for referrals when selling homes. which ended as part of the settlements, are among hundreds being conducted by states and the U.S. Department of Housing and Urban Development into payments by title insurers. State regulators found the referral payments -- to real estate agents, developers, lenders and builders -- led to higher closing costs for consumers.
Pulte, other builders settle kickback claims
October 30, 2007
BY NEIL ROLAND
BLOOMBERG
Pulte Homes Inc. and KB Home are among six home builders that agreed to pay a total of $1.4 million to settle federal investigations into whether they accepted rebates from insurers for referrals when selling homes.
The kickback investigations, which ended as part of the settlements, are among hundreds being conducted by states and the U.S. Department of Housing and Urban Development into payments by title insurers. State regulators found the referral payments -- to real estate agents, developers, lenders and builders -- led to higher closing costs for consumers.
Bloomfield Hills-based Pulte, the third-largest U.S. home builder by revenue, and KB Home, the fifth-biggest, agreed to pay $466,000 and $456,000, respectively, to settle the probes without admitting wrongdoing, the federal housing agency said in a statement Monday.
The top five U.S. home builders have written down land and recorded other charges totaling $5 billion in their most recent quarters, and have reported a total net loss of $2.8 billion. New home sales are projected to fall to the lowest pace since 1997, and there's an eight-month supply of homes for sale in the United States.
The other builders that settled were: Beazer Homes USA Inc., the ninth-largest U.S. home builder, which agreed to pay $261,000; Ryland Group Inc. agreed to pay $84,000; Meritage Homes Corp. agreed to pay $66,000, and Tousa Inc. agreed to pay $52,000.
Under so-called captive reinsurance arrangements, title insurers agreed to rebate portions of the premium they got from home buyers to a company formed by a builder, real estate agent or lender that referred the business to them, according to the settlements. The insurers said they were transferring a portion of the risk to the companies, which paid few if any claims, HUD said.
"It's increasingly clear to us that these complicated business arrangements serve no other purpose than to hide referral fees and kickbacks, which are expressly forbidden by law," HUD Assistant Secretary Brian Montgomery said in the statement.
The states in which the payments were under investigation were Arizona, California, Colorado, Delaware, Nevada, New Jersey, New Mexico, New York, Tennessee and Virginia, according to the settlement documents released by HUD on its Web site.
Insurers, who have no direct contact with consumers, have so far paid the biggest penalties for trying to win shares of the $43-billion U.S. home-settlement sector. First American Corp., the biggest U.S. title insurer, agreed to pay $24 million in 2005 to settle an investigation by eight states, including California, Pennsylvania and New Jersey. |