Castle & Cooke Mortgage will pay a $13 million fine, including $9 million to compensate mortgage borrowers, to resolve a complaint brought by the Consumer Financial Protection Bureau (CFPB) accusing the firm of giving bonuses to loan officers in exchange for steering consumers into higher-priced mortgages.
In the suit filed in July in federal district court, Richard Cordray, director of the CFPB, said the illegal practices that Castle & Cooke Mortgage allegedly engaged in were of the same variety that precipitated the financial crisis.
‘Consumers should be able to get a mortgage without worrying about how the financial incentives of their loan officers may cause them to pay higher rates than they actually qualify for,’ Cordray said at the time.
The CFPB alleged that two of the Utah-based company's chief officers, Matthew A. Pineda, president, and Buck L. Hawkins, senior vice president of capital markets, had violated the Federal Reserve Board's Loan Originator Compensation Rule, which bans compensation based on loan terms such as the interest rate of the loan. Both have admitted no wrongdoing.
Castle & Cooke paid loan officers bigger bonuses when they persuaded consumers to take on more expensive loans, the CFPB said in its complaint. Quarterly bonuses to loan officers who engaged in the scheme ranged from $6,100 to $8,700, the agency said. Loan officers who did not engage in the alleged scheme did not receive quarterly bonuses.
Castle & Cooke, which has 45 branches in 22 states, originated approximately $1.3 billion in loans in 2012, according to the CFPB.
‘Our action has put an end to illegal steering of consumers and has put more than $9 million back in their pockets,’ Cordray said in a statement.
‘With today's resolution, we are pleased that we can now focus our undivided attention on our core mission: extending high-quality loans and superior service to borrower,’ Castle & Cooke said in a company statement. ‘The regulations are complex, but we are committed to legal and regulatory compliance in our lending.’