CFPB Fines Real Estate Entities Over RESPA Violations

by Manatt, Phelps & Phillips, LLP
Contact

Manatt, Phelps & Phillips, LLP

Targeting violations of the Real Estate Settlement Procedures Act (RESPA) by a mortgage lender, two real estate brokers, and a mortgage servicer, the Consumer Financial Protection Bureau (CFPB) announced almost $4 million in penalties and consumer relief.

What happened

According to the Bureau, a California-based mortgage lender with nearly 100 branches across the country engaged in a variety of schemes from at least 2011 through 2016 to pay kickbacks for referrals of mortgage business in violation of RESPA. One tactic: agreements with real estate brokers that served as a cover to deliver payments based on the number of referrals, the CFPB alleged.

The lending company had various types of agreements in place with more than 100 brokers and tracked the number of referrals to adjust payments up or down accordingly, the CFPB claimed. More informal, co-marketing arrangements also operated as vehicles to make payments for referrals, the agency added.

Another kickback payment method—known as "writing in"—required paid brokers to have their clients prequalify with the lender, the Bureau alleged, even consumers that had already prequalified with another lender. The lender also paid kickbacks to a mortgage servicer, the CFPB alleged, where the servicer worked to persuade eligible consumers to refinance for Home Affordable Refinance Program mortgages. The servicer and the lender split the proceeds of the sale of each loan, the Bureau said.

To settle the charges, the mortgage lender will pay a civil penalty of $3.5 million. The company is also prohibited from future RESPA violations, may not pay for referrals and cannot enter into any agreements with settlement service providers to endorse the use of their services.

Two of the real estate brokers that received payments from the lender also reached a deal with the Bureau. The California and Oregon brokers both had marketing services agreements, lead agreements and desk-license agreements that were, in whole or in part, vehicles to obtain illegal payments for referrals, the CFPB alleged. To settle the allegations, the companies promised not to enter into any agreements with settlement service providers to endorse the use of their services and will pay a total of $85,000 in civil penalties, with one realtor chipping in an additional $145,000 in disgorgement.

As for the mortgage servicer, the Connecticut-based company took half the proceeds earned by the lender for the sale of each mortgage loan that originated as a result of its referral, the CFPB alleged, and accepted the return of the mortgage servicing rights of that borrower's new mortgage loan. The servicer also used "trigger leads" from one of the major consumer reporting agencies to target its marketing to consumers seeking to refinance, a use of credit reports prohibited by the Fair Credit Reporting Act (FCRA), the Bureau said.

The consent order with the servicer requires the company to provide $265,000 in redress and halt future violations of both RESPA and the FCRA.

Why it matters

The action "sends a clear message that it is illegal to make or accept payments for mortgage referrals," CFPB Director Richard Cordray said in a statement. "We will hold both sides of these improper arrangements accountable for breaking the law, which skews the real estate market to the disadvantage of consumers and honest businesses." The Bureau has taken aggressive action in both interpreting the anti-kickback provisions of RESPA and then enforcing RESPA's kickback prohibition on prior occasions, including a February 2015 action as well as the basis for the ongoing litigation against PHH Corporation.

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.

© Manatt, Phelps & Phillips, LLP | Attorney Advertising

Written by:

Manatt, Phelps & Phillips, LLP
Contact
more
less

Manatt, Phelps & Phillips, LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.