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Case ID: 2905 | Credit / Debt | 08/19/2004
A class action has been filed against Fountainhead Title Group Corporation and numerous affiliated businesses and mortgage companies on behalf of all Maryland borrowers who entered into mortgage loan transactions using the services of Fountainhead Title where the HUD-1 Settlement Statement, or other document in the loan file, includes a charge for or payment to an Affiliated Business Arrangement for title or closing services. The action alleges that the affiliated businesses are actually shams that allow the title company and mortgage companies to charge borrowers false fees, in violation of the federal Real Estate Settlement Procedures Act and the Maryland Consumer Protection Act. The action seeks unspecified compensatory and punitive damages.
Fountainhead Title relies heavily on mortgage lenders, mortgage brokers, and real estate brokers to obtain business. In order to promote its title services, Fountainhead Title encourages and assists mortgage brokers to set up "Joint Ventures" or "Partnerships" which are allegedly sham entities known as "Affiliated Business Arrangements" or "ABAs." The ABA then serves as a way to pay referral fees and kickbacks to mortgage brokers out of the borrower's pocket--without the borrower ever finding out. At a point prior to its involvement with named plaintiff Cheryl Johnson, Fountainhead Title solicited title work from Knox Financial Group, LLC, allegedly promising that Knox could make additional money for each loan referred without performing any additional work. Fountainhead Title, together with Knox, then set up KF Settlement Services which does business as "Bridgestreet," an ABA that was established to appear on closing documents as an entity that had performed title work or settlement services for the closing of the mortgage loan. Bridgestreet now appears on settlement documents in mortgage loans originated by Knox and closed by Fountainhead Title as an entity that had performed actual title or closing services. Even though Bridgestreet charges fees that ranged from $400 to $1,500 or more, it allegedly performs little or no work in connection with the mortgage transactions. Following the settlements, the fees attributable to Bridgestreet are allegedly channeled back to Knox--all of which are in addition to the normal fees that Fountainhead charges for title and closing work. According to the Maryland Insurance Administration, Bridgestreet is not licensed to conduct mortgage loan closings or title services in the State of Maryland. The action alleges that Bridgestreet does not have sufficient funds to conduct business, does not have its own employees, and does not manage its own business affairs. Neither Bridgestreet nor Knox provide any disclosure to consumers of their affiliated relationship. Allegedly, Bridgestreet does not market its services competitively, but is operated out of Fountainhead Title's offices. The action alleges that Fountainhead Title has created similar sham ABAs for more than 28 mortgage companies, real estate companies and builders throughout Maryland, all of which, in return, referred their mortgage loan closings to Fountainhead Title. All of these mortgage companies are expected to eventually be named as defendants in the action. In addition to setting up Bridgestreet, Fountainhead Title has allegedly established at least 28 other sham ABAs, including, but not limited to: PFC Title, LLC The action alleges that the law firm of Bouland & Brush, which has an ownership interest in Fountainhead Title and maintains offices at Fountainhead Title locations, is involved in the creation of the sham setups. Affiliated business arrangements are not illegal in and of themselves, as long as they actually provide real services--it is only when they are nothing more than a front for giving kickbacks that they run afoul of the law. In September 2002, Cheryl Johnson sought to refinance the mortgage on her home located in Maryland. Through a solicitation, Ms. Johnson established contact with Knox to assist her in obtaining a new mortgage loan for approximately $62,700. Ms. Johnson was interviewed and then closed on her loan, at her home, on November 1, 2002. The loan was adjusted on November 6, 2002. In connection with the loan closing, Ms. Johnson signed a note for $62,700 and was given other loan closing documents by Fountainhead Title which set forth the total costs and fees for Knox's services. The action alleges that at no time was Ms. Johnson given nor did she sign an "Affiliated Business Disclosure" as required by the Real Estate Settlement Procedures Act, advising her that Knox owned part or all of Bridgestreet, or that it had entered into a partnership arrangement with Fountainhead Title. Knox never disclosed to Ms. Johnson that it would receive a fee in respect of the loan closing. As part of the closing services, Fountainhead Title delivered to Ms. Johnson a packet of loan documents, including an allegedly false HUD-1 Settlement Statement that hid Bridgestreet's identity and other loan documents and disclosures. According to Ms. Johnson's HUD-1 Settlement Statement, she paid "Bridgestreet Settlement Services, LLC" for the following services: $185.00 for Abstract or Title Search. The HUD-1 Settlement Statement provided Ms. Johnson was allegedly prepared by Fountainhead Title and was designed, in part, to give Ms. Johnson false assurances that Bridgestreet was providing necessary title services to lull her into a false sense of legitimacy, and preventing her from contesting or questioning the range of charges by Bridgestreet. At Lawcash.com, it is our goal to keep you informed about important legal cases, class actions and settlements. Our lawyers offer free legal evaluations in tort cases, class actions, personal injury, and other lawsuits because we are dedicated to helping you resolve your legal complaints. 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