The Consumer Financial Protection Bureau (CFPB) has fined Prospect Mortgage $3.5 million for allegedly making or accepting payments for illegal mortgage referrals.
In addition, the bureau took action against two real estate brokers and a mortgage servicer that allegedly took illegal kickbacks from Prospect.
The CFPB alleges that from at least 2011 through 2016, Prospect Mortgage used a variety of schemes to pay kickbacks for referrals of mortgage business in violation of the Real Estate Settlement Procedures Act.
For example, Prospect established marketing services agreements with companies that were framed as payments for advertising or promotional services but actually served to disguise payments for referrals.
The CFPB alleges that Prospect Mortgage paid for referrals through various agreements with over 100 real estate brokers, including ReMax Gold Coast and Keller Williams Mid-Willamette. These agreements served primarily as vehicles to deliver payments for referrals of mortgage business, the CFPB says in a release.
Prospect tracked the number of referrals made by each broker and adjusted the amounts paid accordingly, the CFPB says. The mortgage lender also had other, more informal co-marketing arrangements that operated as vehicles to make payments for referrals, bureau officials allege.
The bureau says the lender paid brokers to require consumers – even those who had already pre-qualified with another lender – to pre-qualify with Prospect.
One particular method Prospect used to obtain referrals under its lead agreements was to have brokers engage in a practice of “writing in” Prospect into their real estate listings – meaning that brokers and their agents required anyone seeking to purchase a listed property to obtain pre-qualification with Prospect, even consumers who had pre-qualified for a mortgage with another lender.
The CFPB further alleges that Prospect had an agreement in place with mortgage servicer Planet Home Lending under which Planet worked to identify and persuade eligible consumers to refinance with Prospect for Home Affordable Refinance Program mortgages.
Prospect then evenly split the proceeds from the referrals with Planet. Prospect also sent the resulting mortgage servicing rights back to Planet, bureau officials say in the release.
The real estate brokers and Planet will pay a combined $495,000 in consumer relief, repayment of ill-gotten gains and penalties.
Prospect Mortgage, headquartered in Sherman Oaks, Calif., is one of the largest independent retail mortgage lenders in the U.S., with nearly 100 branches nationwide.