CFPB Fines RPM Mortgage $19M For ‘Illegal Compensation Plan’

Posted by Patrick Barnard on June 05, 2015 No Comments
Categories : Residential Mortgage

RPM Mortgage Inc. will pay $19 million to settle allegations brought by the Consumer Financial Protection Bureau (CFPB) that the lender illegally paid bonuses and higher commissions to loan originators in exchange for steering consumers into costlier mortgages.

In addition, RPM CEO Erwin Robert Hirt will pay a $1 million fine for his role in designing and implementing the firm's illegal compensation plan, the CFPB says in a release.

Headquartered in California, RPM Mortgage operates about 60 branches across six states.

The CFPB alleges that in April 2011, RPM instituted a compensation plan that gave loan officers financial incentives to steer consumers into higher-rate mortgage loans. RPM provided its loan officers with different forms of compensation that were derived in part from the interest rates of the loans they closed.

The company sought to mask this interest-rate-based compensation by filtering it through so-called ’employee-expense accounts,’ the bureau saysin its release. RPM deposited profits from an originator's closed loans – profits that were directly tied to the loans' interest rates – into an expense account set up for the originator.

RPM then used the expense accounts to pay bonuses and higher commissions to its loan originators, the CFPB says. The company also allowed originators to tap their expense accounts to offset interest-rate reductions or give credits to certain customers to avoid losing the transactions to competitors. The illegal bonuses, pricing concessions and supplemental commissions totaled millions of dollars.

The lender's compensation plan was in violation of the Loan Originator Compensation Rule, which the CFPB has enforced since July 2011.

As per the settlement, which is still subject to court approval, RPM will pay $18 million in redress to consumers affected by its unlawful compensation practices. In addition, RPM and Hirt will each pay $1 million to the CFPB's Civil Penalty Fund.

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