Texas Builder Settles With CFPB Over Allegations Of Kickbacks

Posted by Patrick Barnard on June 03, 2013 No Comments
Categories : Residential Mortgage

The Consumer Financial Protection Bureau (CFPB) recently reached a settlement with Texas homebuilder Paul Taylor, whom the agency accused of taking kickbacks for referring mortgage origination business to Benchmark Bank and Willow Bend Mortgage Co.

As per the settlement, Taylor must surrender more than $100,000 he received from the kickbacks, according to the CFPB. In addition, he is prohibited from engaging in future real estate settlement services, including mortgage origination.

The case has led to a renewed focus on kickbacks in home real estate transactions, which were fairly common before the housing crash occurred in 2008. With home prices now on the rise and the market starting to rebound, authorities are reportedly on the alert for kickback scams similar to the one Taylor allegedly masterminded.

‘Kickbacks harm consumers by hampering fair market competition and by unnecessarily increasing the costs of getting a mortgage,’ says CFPB Director Richard Cordray. ‘The CFPB will continue to take action against schemes designed to let service providers profit through unscrupulous and illegal business practices.’

The CFPB alleges that Taylor received illegal referral fees through partnerships with Benchmark Bank and Willow Bend Mortgage. He reportedly worked with the banks to create two ‘shell’ entities – Stratford Mortgage Services, which claimed to be a mortgage originator, and PTH Mortgage Co. – neither of which had an office or any employees. The CFPB alleges Taylor funneled mortgage origination business to the banks through those two entities, receiving kickbacks guised as profit distributions and payments received through a ‘service agreement.’ In fact, it was the two banks that were originating the loans, according to the CFPB.

The CFPB says it became aware of Taylor's conduct via a referral from the Federal Deposit Insurance Corporation (FDIC).

The $118,194 settlement covers violations of the Real Estate Settlement Procedures Act (RESPA), which prohibits giving and receiving kickbacks for services involving federally related mortgages.

In a separate action, the FDIC fined Benchmark Bank for its role in the alleged scam.

The CFPB says it will continue to enforce RESPA's anti-kickback provisions to protect consumers and deter individuals from engaging in illegal activity.

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