According to the CFPB, First Alliance Lending obtains troubled mortgages from servicers and then offers borrowers new loans with reduced principal amounts. In 2010, the company started using a hedge fund to finance its loans, splitting revenues and fees with the affiliates of that fund. In 2011, the company ended its arrangement with the hedge fund but continued to split origination and loss-mitigation fees with the fund.
In 2013, the company self-reported to the CFPB that it believed it had violated the Real Estate Settlement Procedures Act by splitting the fees and cooperated with the subsequent investigation. RESPA bans a person or company from paying or receiving a portion of a fee that hasn’t been earned in a real estate settlement.
“These types of illegal payments can harm consumers by driving up the costs of mortgage settlements,” said CFPB Director Richard Cordray. “The Bureau will use its enforcement authority to ensure that these types of practices are halted. We will, however, also continue to take into account the self-reporting and cooperation of companies in determining how to resolve such matters.”
The Consumer Financial Protection Agency has ordered a Connecticut mortgage lender to pay an $83,000 penalty for illegally splitting real estate fees.