CFPB refresher course
The Consumer Financial Protection Bureau (CFPB) is an executive agency formed in 2011 to protect consumers against “unfair, deceptive, or abusive practices.”
Just recently, our sister site wrote about the CFPB and how it might be on the chopping block under the new Trump administration. This week, the CFPB announced a huge fine for a major U.S. lender over a kickback scheme. And even better, this fine does not go to the lawyers of consumers.
Prospect Mortgage fined $3.5 million
Prospect Mortgage, based in California, had about 100 branches across the country. It was considered one of the largest independent mortgage lenders in the country. From 2011 through 2016, Prospect payed kickbacks for referrals of mortgage business, which is a violation of the Real Estate Procedures Settlement Act (RESPA).
Prospect used various schemes to disguise the payments, typically calling them marketing, advertising or promotional services.
The CFPB alleged that the lender had “improper arrangements” with more than 100 real estate brokers. Prospect reportedly also required consumers to prequalify with Prospect, even if a consumer prequalified with a different lender.
Holding both sides accountable
Prospect Mortgage was fined $3.5 million and it is prohibited from paying for referrals and entering into agreements to endorse the use of their services. The fine goes into the Civil Penalty Fund, which is administrated under the CFPB to compensate victims who haven’t yet received full compensation for their harm from the defendant.
In addition to fining Prospect Mortgage, the CFPB sent a strong message to brokers who had improper arrangements with the company. CFPB Director Richard Cordray said, “We will hold both sides of these improper arrangements accountable for breaking the law, which skews the real estate market to the disadvantage of consumers and honest businesses.”
Prospect Mortgage acquired by HomeBridge
On February 2, HomeBridge Financial Services announced that the company completed the purchase of “operating assets of Prospect Mortgage, LLC from Prospect Holding Company, LLC.”
The sale originated last year in November, and it creates one of the largest non-bank mortgage lenders in the United States.