Mortgage lenders settle RESPA kickback charges for $35.7M

Wells Fargo has agreed to pay $34.8 million to settle allegations that more than 100 loan officers in at least 18 branches steered thousands of mortgage borrowers to a Maryland-based title company in exchange for kickbacks in the form of valuable marketing services and cash.

JPMorgan Chase will also pay $900,000 to resolve a complaint by regulators that at least six Chase loan officers participated in the kickback scheme allegedly employed by Genuine Title.

In its complaint against the lenders, the Consumer Financial Protection Bureau said Genuine Title would help loan officers drum up business by furnishing them with marketing leads — data on consumers likely to refinance a mortgage — purchased from a third-party vendor.

For some loan officers, Genuine Title not only analyzed and purchased consumer leads, it also paid for marketing letters with the banks’ logos to be printed, stuffed into envelopes and mailed. One Wells Fargo loan officer even took “substantial cash payments” that were made to his girlfriend to disguise that they were kickbacks, the government claimed.

In return, loan officers at the banks would refer homebuyers to Genuine Title for closing services, the complaint alleged.

“Homeowners were steered toward this title company, not because they were the best or most affordable, but because they were providing kickbacks to loan officers who referred consumers to them,” said Maryland Attorney General Brian Frosh in a statement. “This type of quid pro quo arrangement is illegal, and it’s unfair to other businesses that play by the rules.”

In agreeing to enter into consent decrees, Wells Fargo and Chase admitted no wrongdoing. The consent decrees are expected to be approved in federal court.

The CFPB said another lender whose loan officers participated in Genuine Title’s alleged scheme “self-identified the problematic practices and terminated the loan officers involved,” cooperated with the bureau’s investigation, and self-initiated a remediation plan. As a result, the bureau said it decided not to take any enforcement action against that lender. Genuine Title went out of business in April.

The Real Estate Settlement Procedures Act (RESPA), which governs the provision of settlement services like title insurance, prohibits companies from paying kickbacks to those in a position to refer business to them, including real estate brokers and agents.

Last fall, Michigan-based Lighthouse Title agreed to pay $200,000 to settle allegations that marketing services agreements it entered into with real estate brokers and other companies violated RESPA.

Inman contributor Brian Boyd has warned that because of potential RESPA pitfalls, marketing services agreements can be like “a wolf in sheep’s clothing within the real estate industry.”

In May, Alabama’s biggest real estate brokerage, RealtySouth, agreed to pay a $500,000 civil penalty to settle allegations that it “strongly encouraged” and in some cases required agents to use its affiliated title insurance and closing services provider. RealtySouth neither admitted nor denied allegations, including claims that the brokerage failed to provide adequate disclosures to consumers that they had a right to shop for settlement services.

After the CFPB took over enforcement of RESPA from the Department of Housing and Urban Development (HUD), Inman columnist Ken Harney warned, “There’s a new RESPA sheriff in town. He’s looking hard for alleged lawbreakers and he seems to be in no mood for compromise.”

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