DEC 5, 2013
Compliance Matters

Comp Payment Record Keeping Reminder





The Consumer Financial Protection Bureau requires a creditor to maintain records sufficient to evidence all compensation it pays to a loan originator, as well as the compensation agreements that govern those payments, for three years after the date of the payments.

Additionally a loan originator organization must maintain records sufficient to evidence all compensation it receives from a creditor, a consumer, or another person and all compensation it pays to any individual loan originators, as well as the compensation agreements that govern those payments or receipts, for three years after the date of the receipts or payments.  (12.cfr Section 1026.25(c)(2)(i))


This rule allows the CFPB examiners an easy way to trace the funds without having to dig through papers. They can find the from your records the payment on each loan to the loan originator if it is retail along with the agreement and more importantly, the payment on each loan from the creditor to the mortgage broker to the loan originator in one log, making it that much easier to trace overpayments, charges and violations of the 3% rule. 



Disparate impact theory allows the government or private litigants to bring discrimination claims based solely on statistics that show an otherwise neutral policy has a disparate impact on protected classes without having to show intent to discriminate.

Although the disparate impact theory is used primarily to bring housing discrimination cases under the Fair Housing Act which prohibits discrimination in housing on the basis of color, religion, sex, familial status and national origin, it could conceivably be used to challenge insurance risk classifications that have a disparate impact on a protected class. Courts have found that homeowners insurance is essential to obtaining a mortgage and, therefore, is subject to the FHA.


As a reminder, it has been found that only doing qualified mortgages does not in and of itself violate the Equal Credit Opportunity Act.  However, does that hold true for the disparate impact rule? Interesting question, is it not?



In a transaction involving federally related mortgage loan, compensation of a real estate broker or agent for marketing services that are directed to particular homebuyers or sellers could easily be a payment that violates Section 8 of the Real Estate Settlement Procedures Act as an illegal kickback for a referral of settlement service business. For example, a real estate broker or agent actively promoting a particular loan originator or lender and its products to sellers or prospective homebuyers by providing loan services using ‘‘sales pitches’’ about the benefits of a particular MLO or Lender by distributing the promotional material at the broker’s or agent’s office or at an open house is considered to be a referral.  Compensating the real estate broker or agent for such promotion would result in a violation of section 8 of RESPA.

Nothing stops a real estate broker or agent from performing services to aid the seller or buyer, or to increase the possibility that the real estate transaction will occur which will benefit the broker or agent. However, the broker or agent may not be compensated for marketing services directed to particular homebuyers or sellers. (See 24 CFR 3500.14(g)(2).) (75fr36271-2010))


There are legal ways to get someplace that you want to go. But exceeding guidelines can create RESPA issues that can cost you tremendously as they did one builder. We do have ideas that we are of the opinion will comply with RESPA. If you have questions contact us. 



On Nov. 27, a couple who owned a now-defunct suburban title company, a disbarred attorney and an attorney are among nine defendants who have been indicted in two separate mortgage fraud cases. Seven defendants were charged together in one case, and two in the second case, together alleging schemes to fraudulently obtain at least four residential mortgage loans totaling more than $1 million from lenders.

Both indictments allege that the mortgages were obtained to finance the purchase of properties using fraudulent means including straw buyers, short sales, inflated prices and unqualified borrowers. As a result, the lenders incurred losses because the mortgages were not fully recovered through subsequent sale or foreclosure.  Seven of the defendants were charged in an indictment that was unsealed on Nov. 25, including disbarred attorney Harvey Wright and Precious House. Others indicted are David Guel and his wife Mary Gleason; Muntazer Ali Saiyed; Saged Ansari and Azeem Syed. All seven were charged with two counts of wire fraud and House, Syed, Saiyed, and Ansari were also charged with one count each of identity theft.

Guel and Gleason owned and operated the former U.S. Worldwide Title Services LLC.

All seven defendants pleaded not guilty in U.S. District Court and were released on bond. A status hearing was scheduled for Jan. 13.

According to the indictment, between September 2008 and March 2009, the defendants caused two fraudulent mortgage loans to be issued by lenders. The alleged fraud involved false representations in documents, including real estate contracts, loan applications, title commitments, and HUD-1 settlement statements concerning sales prices, the true disbursement of the loan proceeds at closing, the buyer’s assets, employment, and income.

The defendants allegedly used straw buyers who had no intention of residing in the property and making mortgage payments, as well as stolen identities of individuals who did not know that their identities were being used to purchase property. Guel, Gleason, Wright, and House allegedly conducted “double closings” where a property was sold to a buyer, who only temporarily took ownership before immediately re-selling to a second buyer at an inflated sales price using a fraudulently obtained mortgage to finance the purchase.

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