Pennsylvania Ag Sues Mortgage Brokers For Respa Violations

A civil complaint announced by Pennsylvania Attorney General Michelle Henry on Jan. 17 asserts that several Lehigh Valley-based mortgage brokers and their manager, Barry Newhart, took part in a kick-back scheme that violates the Real Estate Settlement Procedures Act (RESPA).

This complaint, which was filed in the United States District Court for the Eastern District of Pennsylvania by Deputy Attorney General Pat Gavin, alleged that Newhart and the brokers offered real estate agents discounted ownership in a joint venture mortgage brokerage company and other perks, including sporting event tickets and dinners, in exchange for the agents steering clients to the mortgage brokerage.

The mortgage broker defendants include: Bright Financial Group, LLC; Conquest Mortgage, LLC; Flagship Home Loans, LLC; Legacy Mortgage Partners, LLC; Nittany Home Loans, LLC; and MCT Financial, LLC, all with main offices based in the Allentown, Pennsylvania. area.

Newhart allegedly attempted to disguise the kickbacks as stock sales and cash to referring real estate professionals. The buyers were unaware of the scheme.

“Buying a home can be a stressful and challenging time, and this group of mortgage brokers and real estate agents conspired to serve themselves while betraying buyers,” Attorney General Henry said. “Consumers, especially those who are making large financial investments like the purchase of a home which is very often a family’s most valuable asset, deserve to know if businesses assisting them have conflicts of interest.”

The lawsuit alleges that Newhart and the brokers’ sales practices violate Pennsylvania’s Unfair Trade Practices and Consumer Protection Law, the federal Consumer Financial Protection Act and RESPA.

The complaint states that the total value of the kickbacks was at least $500,000 and potentially amounted to close to or more than a million dollars.

The office is seeking injunctive relief, civil penalties, restitution, costs and attorneys fees, as well as other relief to end this kickback scheme, a release from the Attorney General confirmed.