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WBK Industry News - Federal Regulatory Developments

CFPB Enters Into RESPA Consent Orders with Mortgage Lender, Two Real Estate Brokers and Mortgage Servicer

On January 31, 2017, the CFPB entered into consent orders with a large mortgage lender for allegedly paying kickbacks for mortgage referrals, as well as with two real estate brokers and a mortgage servicer for allegedly accepting the kickbacks, in violation of RESPA. The CFPB also found that the mortgage servicer had violated FCRA in connection with the transactions in question.

Consent Order with Mortgage Lender
The CFPB alleged that the lender used a variety of methods to pay kickbacks for referrals of mortgage business in violation of RESPA Section 8. Specifically, the CFPB found that the lender entered into numerous agreements with real estate brokers to make payments for referrals of mortgage business; paid brokers to require consumers seeking to purchase a listed property to prequalify with the lender, even if the consumers had already prequalified with another lender; and providing a thing of value to a mortgage servicer who referred consumers seeking a refinance to the lender. The consent order requires the lender to pay $3.5 million to the CFPB’s civil penalty fund and prohibits the lender from violating RESPA, paying for referrals, or entering into any agreements with settlement service providers to endorse the use of the lender’s services.

Consent Orders with Real Estate Brokers
The CFPB alleged that the brokers violated RESPA by accepting payments from the mortgage lender in exchange for consumer referrals. The consent orders require the brokers to pay fines totaling $230,000.

Consent Order with Mortgage Servicer
The CFPB alleged that the servicer’s agreement with the mortgage lender facilitated payment of illegal referral fees in violation of RESPA, and that the servicer also violated FCRA by improperly using trigger leads to market to consumers. Specifically, the CFPB found that the servicer violated RESPA by referring consumers seeking to refinance to the mortgage lender in exchange for the right to service any resulting loans. With regard to the alleged FCRA violation, the CFPB found that the servicer ordered trigger leads from major credit reporting agencies to identify borrowers, whose loans it was servicing, who were seeking a refinance. The trigger leads consisted of information about existing servicing customers who had a consumer report reflecting a hard credit inquiry resulting from a mortgage application during the previous day, which served to identify those borrowers actively seeking to refinance. The CFPB concluded that this was a violation of FCRA because the servicer lacked a permissible purpose. The consent order requires the servicer to pay affected consumers $265,000 in redress, prohibits future FCRA and RESPA violations, and prohibits the servicer from paying or accepting payment for referrals and entering into agreements with settlement service providers to endorse the use of their services.

Copies of the consent orders can be viewed here: