From the Wall Street Journal:
Suit Says Real Estate Firms Took Kickbacks
By JAMES R. HAGERTY
May 25, 2007; Page A2
The Justice Department filed a suit against two big real-estate brokerage firms, accusing them of receiving illegal kickbacks for steering home sellers to a provider of hazard reports.
The suit, also accusing the information supplier, was filed in federal court for the central district of California and seeks to recover “illegitimate profits” generated by “sham” joint ventures formerly operated by Realogy Corp., the owner of the Coldwell Banker and Century 21 chains; Prudential California Realty, a franchisee of Prudential Real Estate Affiliates, a unit of Prudential Financial Inc., Newark, N.J.; and Property I.D. Corp., Los Angeles, which provides home sellers with information for their disclosures about such hazards as earthquake and flood risks.
The three companies denied wrongdoing. The brokers said they worked with Property I.D. in a legitimate manner.
The suit is based on an investigation launched in 2005 by the Department of Housing and Urban Development.
The department alleges that the brokers and Property I.D. set up joint ventures designed to funnel payments of $25 per report — a quarter of the fee paid by home sellers — to the brokers in exchange for their referrals of business.
HUD argues that this arrangement violated a provision of the Real Estate Settlement Procedures Act, known as Respa, that bans kickbacks for the referral of services related to the settlement of home sales.
A HUD spokesman didn’t specify how much money the government expects to recover but said the joint ventures generated several million dollars of profits for the companies involved.
Earlier this week, Property I.D. filed a suit against HUD in the same federal court, seeking to end the HUD investigation.
The company argues that hazard reports aren’t settlement services and thus aren’t covered by Respa.
Big drop in home prices predicted
http://money.cnn.com/2007/05/23/real_estate/prediction_big_home_price_drop/index.htm?postversion=2007052413
Some economists see steeper drop in store for home prices.
By Les Christie, CNNMoney.com staff writer
May 24 2007: 1:37 PM EDT
NEW YORK (CNNMoney.com) — Most industry watchers agree that home prices will continue to slide before they recover, but now some economists say they’ve got a long way to fall before bouncing back.
David Wyss, chief economist at Standard & Poors, has forecast a price drop of about 8 percent for the 24-month period through the fourth quarter of 2008.
His prediction came during a general economic outlook session at the Mortgage Bankers Association’s (MBA) National Secondary Market Conference & Expo in New York this week.
Housing prices will suffer from a “significant increase in defaults and foreclosures,” he said, with affordability still a major issue. Wyss worried how hard the slump will hit already highly inflated housing markets.
He said its impact on areas like South Florida, where much of the buying is speculative investment in second homes, could be big. “You don’t need a second home,” Wyss said.
Overall, he said he expects the U.S. economy to slow this year to a growth rate of about 2.25 percent, down from 3.3 percent last year.
Celia Chen, Moody’s Economy.com’s director of housing economics followed Wyss’ lead. “We also have an 8 percent decline in median house prices [for the 24-month period ending March 31, 2008], which is consistent with what David Wyss had.”
“That is quite a bold forecast,” Lawrence Yun, economist at the National Association of Realtors, speaking from his Washington, D.C. office, said of Wyss’s prediction. NAR is predicting a much less severe total decline of 1.4 percent through the slump – prices have already declined three straight quarters – and that a recovery will start to take place in early 2008.
“The run up,” Yun said, “was an investor-demand driven boom, and it was followed by an investor-driven collapse.”
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