CFPB Fines Lender for Fee Splitting

A Connecticut lender has been fined $83,000 by the Consumer Financial Protection Bureau (CFPB) for violating Real Estate Settlement Procedures Act (RESPA) rules.  1^st Alliance Lending, LLC apparently realized it had illegally split real estate settlement fees and notified CFPB on its own of the infraction.

The East Hartford company buys distressed mortgage loans from servicers and then attempts to refinance those loans into new ones with lower principal balances through federally related mortgage programs.  1^st Alliance initially obtained its funding from a hedge fund and split revenues and fees with the hedge fund's affiliates.  In 2011 1^stAlliance ended the financing arrangement but continued to split origination and loss-mitigation fees with the affiliates, a violation of RESPA which  bans a person from paying or receiving a portion or split of a fee that has not been earned in connection with a real estate settlement.   Fees were shared for 83 loan originations between August 2011 and April 2012. 

In 2013, 1^st Alliance reported to the Bureau that it believed it had violated RESPA by paying these unearned fees.    CFPB said that 1^st Alliance cooperated with the Bureau's investigation and provided information related to the conduct of others, facilitating other enforcement investigations.  The lender's self-reporting and cooperationwere taken into account in determining that it would pay an $83,000 civil money penalty

"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.

via:http://www.mortgagenewsdaily.com/02242014_respa_enforcement.asp