Enforcement Alert From Hudson Cook; CFPB Fines Residential Mortgage Loan Originator $1.75 Million For Kickbacks Involving Referrals To Originator By Brokers – Charges, Mortgages, Indemnities

HIGHLIGHTS

• The originator must pay a $1.75 million civil penalty.




• The originator neither admitted nor denied the allegations but
  must implement a compliance plan to ensure its policies comply with
  federal law and is subject to an injunction prohibiting it from
  giving things of value in exchange for referrals.

CASE SUMMARY

The Real Estate Settlement Procedures Act prohibits mortgage
loan originators from offering incentives to other companies in
exchange for referring homebuyers to them for mortgage loans.

The Bureau alleged that the originator paid for referrals
through marketing services agreements under which the originator
paid brokerages approximately $90,000 per month over the relevant
period. In return, the brokers agreed to market on behalf of the
originator, but the CFPB found the originator performed most of the
actual marketing. The Bureau found that these arrangements were
structured to generate mortgage referrals rather than compensate
brokers for their services.

The CFPB also alleged that the originator offered premium
subscription services worth thousands of dollars a month to brokers
free of charge. The subscription services provided access to
information on properties, including comparable sales and
foreclosure data. In addition, the originator hosted company events
at which brokers received free food, beverages, alcohol, and
entertainment.

In exchange for these items, the brokers agreed to be paired
with a loan officer at the originator. The CFPB found that this
conduct violated RESPA Section 8 and its implementing Regulation
X.

The originator did not admit or deny these allegations. To
resolve the matter, it agreed to a five-year consent order levying
a $1.75 million civil penalty and prohibiting the originator from
providing anything of value to other entities in exchange for
mortgage referrals in the future. It is also required to create a
compliance plan to ensure that its policies and procedures comply
with federal consumer financial laws and the consent order.

The CFPB separately levied a civil penalty of $200,000 against a
real estate brokerage firm for accepting things of value from the
originator in exchange for mortgage referrals.

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