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CFPB takes lender to task over 'illegal kickback scheme'

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Mortgage Professional America | 17 Jan 2014, 07:09 AM Agree 0
The CFPB has taken action against a mortgage lender it has accused of an illegal kickback scheme
  • RandyG | | 17 Jan 2014, 08:25 AM Agree 0
    why has cfpb done anything about the illegal kickbacks and direct steering of mortgage referrals from builders?
  • Thomas Hunt | | 17 Jan 2014, 08:30 AM Agree 0
    Attack the small guy, how about NE Moves. Same concept, just legal. Also there is no correlation that consumers would pay a higher rate. Money spent on advertising versus rent would have the same effect if I went along with this principle.
  • Joelle | | 17 Jan 2014, 08:32 AM Agree 0
    Yes the CFPB needs to hit builders. Its ridiculous they get illegal kickbacks from the lenders they use here in Las Vegas its ridiculous.
  • gary | | 17 Jan 2014, 08:34 AM Agree 0
    Builders and attorneys that have foreclosed require they send to their people or they will not pay closing costs. Sounds like a bribe or a scheme that is in the long run hurting the consumer. Where is the justice. maybe they have better lobbyists.
  • being human | | 17 Jan 2014, 08:37 AM Agree 0
    What idiots. They could have just paid the bank a fee. They would just have to document it and inform all parties. Frost bank out of Texas does it. Frost quit doing mortgages years ago. so they send all their customers to a mortgage lender.
  • chad | | 17 Jan 2014, 08:45 AM Agree 0
    How is it legal for builders to continue to abuse the homebuying process with kickbacks to steal business from those or us that are being watched by the CFPB. How are they getting away with this?
  • Debbie | | 17 Jan 2014, 08:47 AM Agree 0
    In our town an unnamed Mortgage Banker gets referral business from the banks by creating an affiliated business relationship. If a client applies for a mortgage with xyz bank the mortgage is referred to this company. I personal called 6 separate banks and was referred to the same company each time.
    I guess there is always a way around the law.
  • Mark H | | 17 Jan 2014, 08:55 AM Agree 0
    What about the bank? Don't they get busted for accepting an illegal kickback?
  • mike | | 17 Jan 2014, 08:56 AM Agree 0
    There is a big difference between kickbacks and legal arrangements. A seller (builder) has always been able to require a buyer to use a particular lender , they offer inentives to help buyers feel better about it but they don't have you to. That is much different fron a bank or anyone else rwferring business for money in return.
  • Jhoanna | | 17 Jan 2014, 08:57 AM Agree 0
    These types of arraignments are the rule and not the exception in most towns around the country. I know of at least two similar arraignments in my hometown here in WA.
  • Roger | | 17 Jan 2014, 08:58 AM Agree 0
    How about going after the realtor offices doing the same thing?
  • Cheryl M | | 17 Jan 2014, 09:13 AM Agree 0
    Debbie, if you are a MLO under the Federal Registry under your license you are required to advise the CFPB (you can remain anonymous) to this "unnamed" Mortgage Bank of their actions. Though there is no rules about being an "advisory client" based on the CFPB there needs to be a clear cut "kickback" Is there?
  • keith | | 17 Jan 2014, 09:16 AM Agree 0
    Real estate agents are the worse in my opinion. In Pittsburgh, and I'm sure elsewhere, they steer their clients to the undisclosed affiliated business relationship settlement companies/attorneys that always cost more then a portfolio lender, like myself.
  • Kirk | | 17 Jan 2014, 09:21 AM Agree 0
    There are always going to be illegal kickbacks so long as someone demands and accepts them. For the payor, they often view them a shakedown they are required to pay to stay in business. The payor and well as the payee needs to be sanctioned since they are as guilty. Those who receive stolen goods have also committed a crime, in the case of these kickback schemes, knowingly. What I want to know is when is a regulator going to target those who demand and accept kickbacks? Namely, REALTORS!
  • Robert | | 17 Jan 2014, 09:35 AM Agree 0
    Richard! Come on now! How cost effective was this fine of $135,076? So, let's see Richard. CFPB includes how many staff & contract employees? So you spent$? to real in this big fine. You are on our payroll. Bigger fish please...
  • Steven | | 17 Jan 2014, 09:38 AM Agree 0
    It is amazing to me that everyone continues with this kickback conversation. I believe a fee paid up front for a referral which of course is simply a lead is not a kickback. It is a source of advertising. However, forcing a borrower to use someone in particular so that that source receives something in return of value should be disallowed. I believe there is a fine line between kickbacks and marketing/advertising. In my opinion a realtor/broker that receives a fixed fee for a referral is the same as Lending Tree or Lower My Bills selling leads and I might add exclusive leads which they do offer. There is no gaurantee the prospective homebuyer will in fact use the referral source. It is up to the consumer to do their due diligence and shop for the best deal.
  • Bill | | 17 Jan 2014, 09:58 AM Agree 0
    CFPB has the bully pulpit now and the law is set up to be viewed with very narrow blinders...against non-lenders brokering mortgages, that's the PC bias. In many states and definitely in Florida since 1992, a person had to be licensed as a mortgage broker to recieve enumeration in any form for assisting in placing mortgage financing and it needed to be documented so the maximum allowable fees could be determined. The builders get away with it because it's part of the "pricing" mechanism. If you get your mortgage from one of our approved vendors, whether affiated or not, you get this price or this credit against your costs or amenities. If you go elsewhere you don't. The rent scheme is unfair stearing of the mortgage, but it has to be proven first and shown the rent noticably exceeds fair rental value, right? That's not going to be easy to scrape that data out of the parties involved. No real changes from the past other than the broker is now the primary target.
  • Bill | | 17 Jan 2014, 10:13 AM Agree 0
    Since the total price is disclosed in every possible way today (and it always has been if you think about it) what is the real problem with paying referral fees? The consumer can compare their costs until the ice caps melt. I agree with and always have the comment someone made, that just like any other advertising referrals costs should be like any other cost of doing business. My insurance agent passes out auto detailing cards to say thank you. Or cards to a popular restaurant. Everyone's doctor has you cooling your heals in their waiting room while they meet with lines of manufacturer's reps passing out drug samples and monetary fees for scripts written. Even your cable company gives you monthly discounts for new referrals. It's never ending until the non-lending broker subject to CFPB pops up. Brokers can't influence an appraiser in any way nowadays by threatening to pull their business. I feel special...don't you?
  • David | | 17 Jan 2014, 10:53 AM Agree 0
    The fee disclosure requirement for lenders to disclose appraisal fees and AMC fees has been made optional to lenders as the CFPB state that it may cause "information overload". I think a borrower may want to know what the AMC makes and what the appraiser make when his deal falls short. When one of the largest lenders pays $250 to the appraiser and $350 to the AMC is seems that most people may want to go elsewhere with there appraisal business. Not of it is disclosed and the bank owned AMC is making all the appraisal money. How many deals have they killed of yours. Why is it a borrower can't pick his AMC in a true competition of businesses. Good AMC companies should be able to compete for this business on a even field.
  • Jeff | | 17 Jan 2014, 11:12 AM Agree 0
    Classic referral kick back strategy. This is happening all over America in Real Estate offices who have 'in house' lenders. The lender pays way too much to rent a cubicle and given access to market or solicit business from the real estate agents. while they the RE broker forbids any other lender step through the door.

    This is called an MSA - marketing service agreement.

    Same with builders as many have already mentioned.

    The result is the lender has to charge the consumer a higher interest rate to cover his costs of 'renting' the cubicle. The lender also ends up putting very inexperienced mortgage officers in the office because they are the only ones who will work for peanuts that the lender pays him/her.

    HUD and the CFPB continue to turn their head and look the other way on this rent for referral tactic.
  • Dave | | 17 Jan 2014, 11:16 AM Agree 0
    Problem arise with free completion when the listing agent tell the buyers (thru selling agent)" Use my lender if you want the property". Since buyers want the house, they just go along with and pay higher rate/fee. CFPB must, some how, stop this if it's primary job is to protect consumers.
  • David | | 17 Jan 2014, 11:17 AM Agree 0
    Oh Yeh! If you have not noticed all the rules are against the small business broker and for the large corporate bank. The whole financial caos was made up and caused by FNMA and large banks to get small brokers out of business. The large banks want the retail business and bought off FNMA. They stole the appraisal business in the same scam. Good luck out there.
  • Michael W | | 17 Jan 2014, 11:19 AM Agree 0
    Mike, I disagree completely with you and have to agree with many of the other commentors. The so called "incentives" offered by builders are largely smoke and mirrors. As a real estate lawyer, mortgage company owner and title company owner with 20 years experience who is personally familiar with profit margins available in providing settlement/title services and mortgage services, the purported value of the "builder incentives" offered by builders FAR exceeds the profits realized from providing the mortgage and title/settlement services. Please take the time to think about that for a moment. This ongoing practice deceives and misleads consumers (personally, I think the conduct is fraudulent) than any other practice I have witnessed and harms consumers more than any other wide-spread and supposedly legitimate practice I have seen in my 20 years.
  • dave | | 17 Jan 2014, 11:27 AM Agree 0
    Jeff, Congratulations!!! you have guts to say it openly. This loophole is being ignored by all government agencies including CFPB. This MSA nonsense (sorry to use this word) hurts fair competition and more than that hurt consumers.
  • NoSpinJustTheFacts | | 17 Jan 2014, 11:50 AM Agree 0
    I would bet dollars to a donut that CFPB had no emperical data to support their claim the rental rate was tied to higher consumer charges.

    The CFPB has already proven themselves to have no concern for consumers with their QM Points & Fees rules. A $100,000 mortgage with 4% rate from a Mortgage Brokerage that has $3001 QM Ponts & Fees with a 3% service release premium to offset $3,000 Brokerage fee would not meet rule (exceeds by $1).

    The EXACT same mortgage with a Bank would meet QM as only $1 would be included in QM Points & Fees. As a matter of fact, the Bank could charge Borrower an additional $2800 in QM Points & Fees and the CFPB QM rules would make it a Qualified Mortgage.

    Please, the CFPB is out to screw consumers and stuff the pockets of banks.

    Director Cordray was made aware of this anti-consumer rule and chose to side with the Banks. It makes no sense to not allow the service release premium to offset Mortgage Brokerage fee.
  • Jeff | | 17 Jan 2014, 12:11 PM Agree 0
    Michael W.

    We all know that new home builders artificially inflate prices and then give $10-$15,000 closing cost incentives when they 'verbally force' and strong arm the buyer to use their 'in house' lender who is kicking back big money. It's like funny money to them. You cannot deny that.

    The lender may not make all $10-$15,000 when inflating the rate and fee in order to make larger rebate/SRP, but a large portion of it is recouped......and then laundered back to the builder.

    I have seen GFE and final HUDs of buyers who were forced to use the builders and/or real estate brokers in house lender and they ALWAYS pay a higher rate than what they could get from 20 other local independent banker/brokers.

    They reason they don't give the closing costs incentive when a buyer doesn't use their 'lender' is because they cannot recoup most of the 'incentive back from the buyer.

    The only time builders give the closing cost incentive when a buyer doesn't use their 'in house' lender is when homes are not selling or when the buyer gets their mortgage denied and they are so far along in the building process that it would cost them more money to cancel and go find a new qualified sucker....I mean buyer....to buy a home that is $10K to $20K over priced.

    There is no other logical reason for a builder or real estate brokerage to have an in house lender....they only do it to make themselves money but use smoke and mirrors to justify it. In house lenders, especially the big nationwide lenders, do not close faster or have more mortgage options, and do not provide better service.

    There is literally no benefit to the buyer to use an in house lender...and 90% of the time, it costs them more money.
  • Rick from No. CA | | 17 Jan 2014, 12:13 PM Agree 0
    The mortgage industry is extremely over regulated. With all the Federal "watch dogs" (CFPB, NMLS, Safe Harbor, FBI, IRS, etc.) you would think they could make a good faith estimate that the borrower can understand. The other thing that gets me fired up is the playing field is not even. The brokers must deal with the borrower vs. lender compensation, while the banks continue with the old method of disclosures. The bank mortgage officer does not pay for annual licensing fees, they just register with NMLS. If the Feds can't make a profit from the Post Office, how are they going to run the mortgage industry. You can already see signs of over regulation with income restriction, over disclosures, "hang'em high" underwriting and the industries losing quality mortgage officers and brokers. There will also be mortgage officers that are dishonest, but they are few compared to the lending industry. The Federal watch dogs are forcing us to eat bones while they try to justify there value. It's time to say, see ya, I wouldn't want to be ya.
  • Ryan | | 17 Jan 2014, 12:39 PM Agree 0
    This type of thing happens all the time with lenders and real estate brokerages. "Lease agreements" or "Marketing Agreements" which clearly are for buying referrals. Otherwise known as kickbacks. This offers unfair competitive advantage to the highest bidding mortgage company, then places the many consumers (especially first timers) into a situation where they feel quietly obligated to use that lender and all the time are paying higher costs because the fees paid to the agency are padded or hidden in the margins or upfront costs. Ridiculous. What's funny is that an actual mortgage company, probably helping finance the bank's turn downs gets hammered while these other RE office/lender MSA's remain unscathed. Thanks NAR.
  • John C Durham | | 17 Jan 2014, 05:43 PM Agree 0
    How does one go about getting a kickback from a lender? Anybody know from personal experience? From hearsay?
  • John C Durham | | 17 Jan 2014, 07:47 PM Agree 0
    Robert, right on. When Richard was Attorney General in Ohio he collected Billions from the banks for Ohio. His replacement has done almost nothing at all. Getting the BIG fish is something that needs to be part of all the Political Partiy's Platforms.
  • GS | | 18 Jan 2014, 07:03 AM Agree 0
    I think I can top all......How about the Real Estate broker and builder who are also on the Board of Directors at the bank where it is "suggested" that all clients should be referred? Or the Coldwell Banker office with the inside PPH/Cendant mortgage company. The referrals to the mortgage company determine who gets awarded the real estate company relocation referrals. Greed is alive and well and we are only kidding ourselves if we think the CFPB can even begin to put a dent in the situation.
  • NoSpinJustTheFacts | | 18 Jan 2014, 07:23 AM Agree 0
    Ryan,

    Please provide your empirical data to support your philosophy.

    Utilizing your logic, all clothing and food manufacturers should have their own retail stores and not pay for self-space.

    Completely agree consumers must have options to freely choose their service/product providers. It is the consumer that needs to decide if pricing meets their objectives for service/product.
  • Jeff in NY | | 20 Jan 2014, 07:40 AM Agree 0
    Someone should tell the CFPB to open their eyes and look at banks and mortgage companies that pay real estate companies kickbacks to sit in their offices disguised as rent payments and marketing agreements. Not to mention real estate companies like who have their own mortgage companies. This is steering and anticompetitive. Harmful to consumers by hampering fair market competition and by unnecessarily increasing the costs of getting a mortgage. I can't believe that these kickback schemes have been a loud to exist for so long. It goes to show you the political power of these banks and real estate companies. They all need to be fined, pay restitution and sanctioned. The regulatory authorities that have aloud these relationships to exist also need to be questioned.
  • Steven | | 20 Jan 2014, 09:19 AM Agree 0
    I couldn't agree with No Spin more. We should spend more time focusing on consumer choices as opposed to arguing "quietly obligated" and MSA's. Let's not forget in the end it is the consumer who makes the final decision. That should be the focus here. Is it wrong for Coldwell Banker to offer financial services? NO! I am tired of blaming the industry...educate the consumers but in the end it is the consumer choice. Buyer beware...what happened to that? You mean to tell me if a client went to Coldwell Banker and received a quote from one of the mortgage reps for a 30 year fixed FHA conforming mortgage with a rate of 5.5% today and decided to apply it is the financial institutions fault? Illegal kickbacks do nothing but hurt our industry but these so called one stop shops and MSA agreements are not hurting this business.
  • Jeff | | 20 Jan 2014, 10:12 AM Agree 0
    Real estate companies with affiliated mortgage companies or MSA agreements use unethical and high pressure sales tactics to obtain and retain financing end of the transaction. They do not let outside mortgage companies offer their services to their agents and pressure their agents to steer the consumer to the in house rep. The agents are pressured. The manager has mortgage performance goals. The mortgage company pays and the real estate company is paid. There is a tremendous amount of pressure to steer. This is anti-competitive and anti-consumer free will/choice. I am shocked that Dodd Frank did not address these types of relationships. The consumer can only hope that the CFPB will address them.
  • Wm Matz | | 20 Jan 2014, 10:12 AM Agree 0
    Michael W and Jeff are correct as to what a sham the builder incentives are. As a tax/real estate atty, former general counsel of a builder, and non-affiliated mtg broker, I echo the claim that buyers get worse mortgage terms thru the "preferred lender".

    Aside from possible claims of fraud or misrepresentation, such arrangements are also subject to attack under anti-trust laws as a "tying arrangement"; it is illegal to tie the purchase of a more desired item [home] to a required purchase of a less desired item [mortgage]. However, the practical reality is no borrower is likely to have the means and inclination to pursue such a legal claim for [e.g.] $10-15K.

    Another insidious result of the builder-as-lender model was the incentive to "push" appraisals to close sales. That practice was what led to HVCC.
  • John C Durham | | 20 Jan 2014, 01:34 PM Agree 0
    WmMatx
    I guess you provide a good argument for why some buyers need the CFPB. "Buyer beware" is BS. No one has some right to trick someone out of their money. We can make a living playing a straight game. It's called being Professional. Helping people is why we get paid. If we get paid to protect and instead knowingly are hurting-it's a crime. Really. And, should be.
  • Steven | | 20 Jan 2014, 03:25 PM Agree 0
    John...Who said anything about tricking a potential client? How about a GFE? TIL? Broker Fee Agreement when applicable? Do these documents mean anything? If one lender discloses a higher rate than another and the borrower chooses the lender referred by the realtor at a higher rate/fess what does that have to do with the professionalism of the MLO? You cannot say the MLO is unprofessional because he is offering a higher rate. Buyers are in fact responsible for their decisions as are we.
  • Steven | | 20 Jan 2014, 03:28 PM Agree 0
    ATR, QM, GFE of 2010, AIR, etc isn't this enough? The government provides consultants to determine if an offer is fair or not. Isn't this enough regulation and hand holding to determine what is fair? In my opinion it is over kill. The government doesn't need to be making decisions for us.
  • Jeff | | 20 Jan 2014, 05:19 PM Agree 0
    Steven - Good discussion here.....the GFE is sham as well. Anyone can prepare and give a GFE for any rate they want or feel will win them the business. Lenders make those rate/fee offering available for 15 minutes at a time....so who cares if the rate is lower than what they can actually lock in.

    To truly compare lowest rate/fee/cost, a borrower would have to compare 2-3 GFE's with locked rates.

    Lenders are still bait and switching borrowers on rate by simply disclosing a lower rate, and when it comes time to lock, state the rate has changed due to the market conditions.....regardless if the market changed or not.

    There is no way for a buyer, who is 2-3 weeks into contract and about to lock a rate, can know whether the initial rate was legitimate or not.

    Lets not even start discussing how mortgage brokers purposely steer borrowers to higher rates by submitting to lenders who they have set up higher comp plans with.

    All brokers will have at least 3 FHA lenders set at different comp plans...maybe one at 150 bps, another at 200 bps and another at 250 bps.

    Brokers submit to the wholesale lender they feel they can make the most from. If they feel the borrower is very rate sensitive, they are submitting to the 150 bps com plan broker. If not rate sensitive, they submit to the 250 bps comp lender.

    The higher the comp a broker makes, in 90% of the time, the borrower ends up with a higher rate.

    The borrower is never the wiser....they don't know what the don't know.

    But I digress....the bigger problem is the builder/lender or Real Estate Broker/in house lender who has an MSA.

    These lenders who have MSA's with RE brokerages actually increase the 'rent' they pay based on how many mortgages the real estate agents refer back to the lender.

    How can that be compliant or good for the consumer? Adjustable rent based on # of referrals?

    I feel like we are sometimes living in the days of prohibition where the govt. just looks the other way.....crazy stuff.
  • John C Durham | | 20 Jan 2014, 06:01 PM Agree 0
    Sure, your'e right. But, that is not what is going on in these lawsuits and I don't think the average person can understand what we are saying if we say we are against the scams but hate E. Warren and CFPB. They are likely to assume that YOU are all for scamming the customer. See?

    All my life I've heard crap talk about FDR. But, after reviewing actual history, generally he and Henry Wallace created the nice economic conditions of 1945-1975 and it was Harry Truman who was the forerunner for Nixon, Carter, Reagan, Bush, Clinton, Obama dictator types.

    You want a better country? Then figure out which side of this thing you're on, the scammers or those who are actually trying to do something. Warren and Cordray should be the last people in government today to be attacked. It's clear out of proportion the work of those creeps working inside the Clinton, Bush, Obama administration.

    So far, the only two people out of the last four administrations that I can name who have put their necks on the line are the two people here love to hate. I can't explain why Obama brought them into the White House when he seems so clueless about almost everything else the people need. What a universe away from FDR, Eisenhower, Kennedy these clowns are...
  • gary | | 21 Jan 2014, 07:23 AM Agree 0
    No different or any less than the piece of dirt banks that wrongly have one set of rules and APR when the rest of their competitors have much higher standards. This was accomplished solely by manipulating legislatures. Truly a violation of the Sherman Anti -Trust Laws. No different than the bank sending business to their insurance ARM. Go after the commercial banks and their balloons that destroy the small businessman's dream. They abide by NO rules, can balloon a mortgage that had been paid perfectly. Met with our Congressman about the QM and damage it has and will do to the mom and pop shops. True gentleman. He made it very clear that you must be on the Financial Services Committee to get anything accomplished in our field. Without being on this Committee you can propose whatever bills you would like but it will never get out there to be voted on.
  • John C Durham | | 21 Jan 2014, 09:27 AM Agree 0
    Jeff & Gary, all of us need to get an appointment with E.Warren & Cordray, together AND all of us get our ass down to Washington and meet with them. I don't want to hear any smears about either of these two People. I want to hear what you all are willing to do if you ever HAD THE EAR OF A REAL PERSON IN WASHINGTON.

    What are all youawl going to DO? Or, are you just going tell me that everyone in Washington is a crook long enough to make sure no good person WILL EVER RUN FOR PUBLIC OFFICE?
  • Wm Matz | | 21 Jan 2014, 03:18 PM Agree 0
    John,

    I agree with you that we should not be attacking EW and RC. I think -possibly naively- that their hearts are in the right place, but they do not understand the depth of the problem. I have advocated making VA mortgages the example, as there is still a lot of support for vets. When I can originate VA mortgages at 3.75% [no points/origination] and the Big Banks charge 4.5%, they are simply using the Fed guarantee to line their pockets, not help vets, as intended. Funny thing, after closing my own VA mortgage, it was immediately sold to a big bank, but my rate is much lower than if I went direct.
  • John C Durham | | 21 Jan 2014, 05:32 PM Agree 0
    Wm,

    I don't think they naive at all, they know the heart of the problem is the TBTF banks, and every other sector that has to with land sales, mortgages, every sector. This includes the local people in charge of Deeds, who have been screwed out of Billions of fees nationally and there is a cloud over every Title that has gone through big banks and their title registration substitute MERS.

    Now, they are aware of every part of this and Cordray has been part of major lawsuits against the TBTF banks, but these banks just keep coming at us. Why? Because THEY PRINT THE MONEY! The TBTF banks run the FED and that's where CREDIT comes from.

    However, I believe that there are some details that need to be filled in about our business and IT IS OUR RESPONSIBILITY AS CITIZENS OF THE NATION TO SEE THAT THEY ARE FILLED IN.

    How many of you here have ever been involved in passing a law that benefited The People GENERALLY? That's what we should all be doing instead of letting the big corporations and banks and all the organizations that back them up, operate in the VACUUM WE CREATED, sending their legislation over to Washington. More money went into Congress from the big banks than ANY OTHER SECTOR in this whole nation.

    What did we do? What have we done? What do we PLAN on doing?
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