First American Settles HUD Dispute Over Title Affiliates

First American Corp. has agreed to pay $680,000 to settle a dispute with the Department of Housing and Urban Development over alleged kickbacks paid to sham real estate affiliates, the agency said Wednesday.

The Santa Ana title insurer also agreed to cease any further operations involving the alleged phony business affiliations.

According to HUD, First American, doing business as Memphis Title Co., created eight title firms affiliated with builders, real estate agents and mortgage brokers in Tennessee. Those firms were then paid for certain title and settlement work that was performed by First American instead.

HUD concluded that the companies were not legitimate affiliated businesses, and that the payments were made in exchange for client referrals.

Such practices are violations of the Real Estate Settlement Procedures Act. The law allows companies to set up affiliated business partnerships, but draws a line when it comes to paying partners when no services are rendered.

Calls to First American weren’t returned. Under the settlement, the company denied any wrongdoing or liability.

Regulators have been cracking down on alleged kickbacks by real estate-related companies, such as title insurers, made in exchange for client referrals.