The Consumer Finance Protection Bureau (CFPB) [1] announced Tuesday it would levy almost $4 million in penalties in connection to an illegal kickback scheme involving a major mortgage lender, real estate brokers and a servicer.
The CFPB said the Sherman Oaks, California-based Prospect Mortgage will pay $3.5 million in civil penalties, while the real estate brokers and servicer will pay a combined $495,000 in consumer relief, repayment of “ill-gotten gains” and penalties.
“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 is one of the largest independent retail mortgage lenders in the United States, with roughly 100 branches across the country. The CFPB’s announcement named RGC Services (doing business as ReMax Gold Coast) and Willamette Legacy (doing business as Keller Williams Mid-Willamette as two of more than 100 real estate brokers with whom Prospect had “improper arrangements.”
The CFPB said Prospect paid for referrals through these arrangements, and paid brokers to require consumers-even those who had already prequalified with another lender-to prequalify with Prospect.
“One particular method Prospect used to obtain referrals under their lead agreements was to have brokers engage in a practice of “writing in” Prospect into their real estate listings,” the CFPB said in their statement. “’Writing in’ meant that brokers and their agents required anyone seeking to purchase a listed property to obtain prequalification with Prospect, even consumers who had prequalified for a mortgage with another lender.”
The CFPB also said Prospect and Planet Home Lending had an agreement where Planet steered eligible consumers to refinance with Prospect for their Home Affordable Refinance Program (HARP) mortgages.