CFPB Takes Enforcement Action Against Mortgage Lender for Alleged RESPA Violations

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The CFPB announced it has entered into a consent order with a mortgage lender, engaged primarily in loss-mitigation refinancing, for violations of Section 8 of the Real Estate Settlement Procedures Act.  Section 8 of RESPA prohibits a person from paying or receiving a fee that has not been earned in connection with a real estate settlement service.  According to the CFPB, the mortgage lender, after ending its financing relationship with a hedge fund, continued to split origination and loss-mitigation fees on numerous loans with affiliates of the fund, even though none of the affiliates “provided financing or any other service for any of [the] mortgages.”

The terms of the consent order require the mortgage lender to pay a civil money penalty and to agree to not violate RESPA in the future. Importantly, the mortgage lender self-reported to the CFPB, consistent with the CFPB’s bulletin on Responsible Business Conduct (see July 9, 2013 Alert), that it believed it had violated RESPA by paying those fees, and the CFPB stated that it took the lender’s self-reporting into consideration in entering into the consent order. The bulletin on Responsible Business Conduct noted that “responsible conduct” includes self-policing, self-reporting, remediation and cooperation, and required a party to substantially exceed the standard of what is required by law in its interactions with the CFPB.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this informational piece (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

 

 

Topics:  CFPB, Enforcement Actions, Mortgages, RESPA

Published In: Consumer Protection Updates, Finance & Banking Updates, Residential Real Estate Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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