Another Obama nominee facing legal questions

Alan Zibel – Associated Press Writer – 4/28/2009 3:05:00 PM

Posted By Cecilia Trent

WASHINGTON – Lawmakers on Tuesday delayed a vote to confirm the Obama administration’s nominee for a key housing post to review lawsuits alleging his real estate company broke federal anti-kickback laws.

The Senate Banking Committee had been scheduled to vote to confirm David Stevens, president and chief operating officer of Long & Foster, as an assistant secretary for the Department of Housing and Urban Development.

Stevens, who was nominated in March, had a confirmation hearing last week. But lawmakers decided to hold off on a final vote after being told this week of new information concerning a legal case involving Long & Foster, a Virginia real estate brokerage, banking committee spokeswoman Justine Sessions said.

The committee confirmed six other Obama administration officials on Tuesday, including four from HUD.

Chantilly, Va.-based Long & Foster is facing several class action lawsuits, filed in U.S. District Court in Baltimore, alleging that it broke the law governing the relationships between real estate agents, title companies and mortgage lenders. The suits allege Long & Foster agents steered homebuyers to affiliated mortgage and title companies, which then shared the profits with the real estate brokerage.

Such affiliated relationships are common in the real estate industry and by themselves are not illegal. HUD enforces the laws designed to protect consumers from any abuses from these close business relationships.

In October 2007, six big homebuilders agreed to pay $1.4 million to resolve federal allegations that they illegally established title insurance companies that took payments amounting to kickbacks. The builders agreed to halt the practices.

Long and Foster has a 50-50 joint venture with Wells Fargo & Co, known as Prosperity Mortgage. It says the relationship is a legitimate because Prosperity is run as a separate business entity with its own employees.

“It’s like putting the fox in charge of the henhouse,” said Richard Gordon, a Baltimore-area lawyer who has filed four class action cases against Long & Foster. “Here’s a guy who’s a president of the company against which their are significant allegations … He just doesn’t have a good track record on this.”

HUD, however, said it investigated the claims underlying the litigation 18 months ago and found no violation of the law. Stevens also wasn’t named as a defendant in the lawsuits.

“We continue to believe that David Stevens is an excellent choice to lead the FHA through the current housing crisis,” said Melanie Roussell, HUD spokeswoman. Stevens declined to comment.

Long & Foster’s mortgage joint-venture is a “legitimate and substantial player in the mortgage business,” said Jay Varon, a lawyer for the company. “The notion that it’s not a genuine entity is without any shred of merit.”

Stevens helped draft a 2007 memo to Long & Foster employees that raised eyebrows because it encouraged real estate agents to use Prosperity Mortgage.

Varon defended that memo, saying that “it’s permissible to encourage people to use their joint venture as long as you don’t pay them or require them to do it.”

Posted by Cecilia Trent