The Consumer Financial Protection Bureau has charged a mortgage lender with allegedly paying illegal kickbacks prohibited by Section 8(a) the Real Estate Settlement Procedures Act. Prospect Mortgage, LLC, a major mortgage lender, is ordered to pay a $3.5 million civil penalty for its illegal conduct. The CFPB also charged two real estate brokers and a mortgage servicer for taking the kickbacks from Prospect. The brokers and servicer will pay a combined $495,000.
"Today’s action sends a clear message that it is illegal to make or accept payments for mortgage referrals," said CFPB Director Richard Cordray. "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."
Prospect Mortgage, LLC, is one of the largest independent retail mortgage lenders in the United States. The two real estate brokers are RGC Services, Inc., doing business as ReMax Gold Coast, and Willamette Legacy, LLC, doing business as Keller Williams Mid-Willamette. The brokers are two of more than 100 real estate brokers with which Prospect had improper arrangements, according to the bureau. The CFPB named Planet Home Lending, LLC, as the mortgage servicer involved in the scheme. The CFPB charged that Planet Home Lending referred consumers to Prospect Mortgage and accepted fees in return.
Prospect Mortgage. The CFPB charged that Prospect Mortgage, from at least 2011 through 2016, used a variety of schemes to pay kickbacks for referrals of mortgage business. According to the consent order issued on Jan. 31, 2017, Prospect Mortgage:
- paid for referrals through agreements with over 100 real estate brokers, tracking the number of referrals made by each broker and adjusting the amounts paid accordingly;
- paid brokers to engage in the practice of "writing in" Prospect into their real estate listings, meaning that brokers and their agents required anyone seeking to purchase a listed property to obtain prequalification with Prospect; and
- plit fees with Planet Home Lending to obtain consumer referrals through the Home Affordable Refinance Program.
Under the consent order, the mortgage lender will pay $3.5 million to the CFPB’s Civil Penalty Fund for its illegal kickback schemes. The company also is prohibited from future RESPA violations and is ordered to refrain from paying for referrals and entering into any agreements with settlement service providers to endorse the use of their services.
Real estate brokers. Under the ReMax Gold Coast consent order and the order issued against Keller Williams Mid-Willamette, both companies are prohibited from violating RESPA moving forward. The companies will not pay or accept payment for referrals nor enter into any agreements with settlement service providers to endorse the use of their services. ReMax Gold Coast will pay $50,000 in civil money penalties, and Keller Williams Mid-Willamette will pay $145,000 in disgorgement and $35,000 in penalties.
Planet Home Lending. The CFPB found that Planet Home Lending accepted fees from Prospect for referring consumers seeking to refinance. According to the consent order, Planet Home Lending took half the proceeds earned by Prospect for the sale of each mortgage loan originated as a result of a referral from Planet. Planet also accepted the return of the mortgage servicing rights of that consumer’s new mortgage loan.
The CFPB also alleged that Planet ordered "trigger leads" from one of the major consumer reporting agencies to identify which of its consumers were seeking to refinance so it could market Prospect to them. According to the bureau, this was a prohibited use of credit reports under the Fair Credit Reporting Act because Planet was not a lender and could not make a firm offer of credit to those consumers.
The order requires Planet pay harmed consumers $265,000 in redress. The company also is prohibited from violating the FCRA and RESPA and ordered not to pay or accept payment for referrals or enter into any agreements with settlement service providers to endorse the use of their services.
