"Today's action sends a clear message that it is illegal to make or accept payments for mortgage referrals," said CFPB Director Richard Cordray.
"Today's action sends a clear message that it is illegal to make or accept payments for mortgage referrals," said CFPB Director Richard Cordray. Image: Bloomberg News

The Consumer Financial Protection Bureau hit Prospect Mortgage with a $3.5 million fine for allegedly paying kickbacks to two real estate brokers and a servicer for referrals of government-backed mortgage loans.

The bureau also took action against Keller Williams Realty Mid-Willamette and Remax Gold Coast, which were among more than 100 real estate brokers that had "improper arrangements" with the Sherman Oaks, Calif., firm, the CFPB said.

"Today's action sends a clear message that it is illegal to make or accept payments for mortgage referrals," CFPB Director Richard Cordray said in a press release. "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."

The CFPB said that Prospect created marketing services agreements from 2011 to 2016 and made payments to various companies that were disguised as advertising and promotional services. Prospect paid real estate brokers from $200 to $20,000 a month in return for borrower referrals, the bureau said.

Prospect tracked the number of referrals made by each broker and also paid various real estate brokers to locate loan officers at Prospect using desk licensing agreements, the CFPB said. Additionally, Prospect allegedly paid brokers to "prequalify" home loan borrowers with Prospect and to "write in" the lender’s name for anyone seeking to purchase a listed property, the CFPB said. The company allegedly split fees with Planet Home Lending, a Connecticut mortgage servicer that it hired to identify and help persuade eligible consumers to refinance into a government-backed loan through Prospect.

Under the consent order, Prospect will pay $3.5 million to the CFPB’s civil penalty fund. Keller Williams Realty Mid-Willamette will pay $145,000 in disgorgement and $35,000 in penalties and Remax Gold Coast will pay $50,000 in civil money penalties, the CFPB stated.

Planet Home Lending, a Meriden, Conn., mortgage servicer, will pay $265,000 in redress to harmed consumers for accepting illegal kickbacks for referrals in violation of the Real Estate Settlement Procedures Act, which prohibits making payments or giving kickbacks to anyone in return for a referral to a real estate settlement service provider.

Prospect would not confirm or deny the CFPB's charges.

"Today's settlement with the CFPB regarding alleged origination practices initiated under the prior management team, closes an important chapter in the company's history," Prospect said in an emailed statement. "Under Prospect Mortgage's new leadership team, the company has rebuilt its legal, regulatory and compliance practices."

A manager at Keller Williams Realty Mid-Willamette in Corvalis, Ore., did not return a call seeking comment. The CFPB did not identify the specific office of Remax Gold Coast. Planet Home did not return a call seeking comment.

Planet Home had ordered so-called trigger leads from a major consumer reporting agency to identify customers seeking to refinance, which is a prohibited use of credit reports under the Fair Credit Reporting Act.

Prospect had run afoul of California regulators in 2015. The lender agreed to pay $10.1 million for inflating settlement service fees charged for more than 70,000 borrowers during a four-year period, according to California's Department of Business Oversight.

In November, Prospect, which is backed by the Chicago-based private equity firm Sterling Partners, agreed to sell its sales and operating assets, including 150 retail offices, to Homebridge Financial Services, an Iselin, N.J., lender. Many of the Prospect's executives, including Michael Williams, a former Fannie Mae president and CEO, joined HomeBridge.

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