The U.S. Department of Housing and Urban Development has sued two real-estate brokerages, accusing them of receiving kickbacks for steering home sellers to a provider of hazard reports.

The suit, filed on Wednesday in the central district of California, seeks to recover “illegitimate profits” generated by “sham” joint ventures formerly operated by Realogy Corp., Prudential California Realty and Property I.D. Corp.

Under California law, home sellers or their real estate agents are required to provide a statement of hazards, such as flooding, fires, or earthquake fault lines, usually in the settlement process for a property sale, according to the government.

The suit alleges that over the past ten years, Property I.D., which provides hazard reports, formed a number of joint venture “sham” companies with real estate brokers.

The suit alleges the companies were created for the sole purpose of referring business to Property I.D. and that brokers who made referrals received kickbacks through the “sham” companies.

The suit came as a result of an investigation the Department of Housing and Urban Development launched in 2005, it said.

“It is illegal to give or to get anything of value in exchange for the referral of settlement service business,” said Gary Cunningham, the Department of Housing and Urban Development’s Deputy Assistant Secretary for Regulatory Affairs, in a statement.

Prudential Realty said it does not believe the hazard disclosure reports were included in the definition of “settlement services.”

“Prudential California Realty takes any allegation of impropriety seriously and will defend its position in due course,” the company said in a statement.

Prudential California Realty is a franchisee of Prudential Real Estate Affiliates, a unit of Prudential Financial Inc..

Attempts to contact the other named companies were unsuccessful. The Wall Street Journal, which reported the suit earlier, said the companies had denied wrongdoing.

Information from: Reuters

This entry was posted on Sunday, May 27th, 2007 at 10:50 am and is filed under Real Estate. Tags: California Department of Housing and Urban Development development earthquake Property Prudential Prudential California Prudential Financial Inc Real Estate real estate agent real estate agents real estate broker real estate brokers Realogy Realogy Corp Realty U.S. Department of Housing and Urban Development Wall Street Wall Street Journal . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.