Mortgage Lender Denies Violating LO Comp Rule

Castle & Cooke Mortgage claims it did not make illegal incentive payments to its loan officers, as alleged by the Consumer Financial Protection Bureau, and it is looking for an “amicable resolution” of the matter.

“The company has been cooperating with the CFPB in its investigation for more than a year, and anticipates an amicable resolution in this complex regulatory matter,” according to a statement issued by the Salt Lake City-based lender.

Castle & Cooke Mortgage issued the statement late Tuesday afternoon after NMN posted its online story about the CFPB lawsuit.

Meanwhile, Castle & Cooke president Matthew Pineda has denied allegations about paying illegal bonuses to its LOs that persuaded borrowers to take out loans with higher interest rates.

"We don't compensate loan officers based on the terms of a loan and we are not motivated to upsell," Pineda told American Banker.

The consumer bureau is alleging that Castle & Cooke violated the LO compensation rule approved by the Federal Reserve Board which went into effect in April 2011. The Fed rule prohibits lenders from rewarding LOs that steer borrowers into higher-priced loans. The CFPB claims 150 of Castle & Cooke’s loan officers received quarterly bonuses ranging from $6,100 to $8,700 for charging higher rates. The bureau estimates 1,100 of the bonuses were illegal. Loan officers that “didn’t charge higher rates did not receive quarterly bonuses,” according to the CFPB.

The consumer watchdog agency filed its lawsuit against Castle & Cooke Mortgage in U.S. District Court in Salt Lake City on July 23.