On January 31, the CFPB fined Prospect Mortgage $3.5 million for allegedly paying illegal kickbacks for mortgage business referrals. The CFPB also took action against Keller Williams Realty Mid-Willamette, ReMax Gold Coast, and Planet Home Lending for accepting illegal kickbacks from Prospect Mortgage.

The CFPB alleged that the entities engaged in various practices involving illegal kickbacks for referrals of mortgage business in violation of the Real Estate Settlement Procedures Act (RESPA). RESPA prohibits kickbacks and referral fees in connection with a real estate settlement such as title insurance, inspections, appraisals, and loan origination.

In a Bureau press release , CFPB Director Richard Cordray announced that the CFPB intends to “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

Prospect Mortgage, which is headquartered in Sherman Oaks, California, is one of the country’s largest independent retail mortgage lenders. Prospect offers a range of mortgages to consumers, including conventional, FHA and VA loans.

According to the consent order , Prospect allegedly engaged in the following unlawful practices:

Paying for referrals through disguised marketing agreements. From at least 2011 to 2016, Prospect established marketing services agreements which operated as a means for Prospect to pay for referrals. Prospect used the scheme to disguise payments for referrals as payments to various companies for advertising and promotional services.

From at least 2011 to 2016, Prospect established marketing services agreements which operated as a means for Prospect to pay for referrals. Prospect used the scheme to disguise payments for referrals as payments to various companies for advertising and promotional services. Requiring brokers to require consumers to pre-qualify with Prospect. Prospect allegedly paid brokers to pre-qualify home loan borrowers with Prospect even if the consumer had already pre-qualified for a mortgage with another lender.

Prospect allegedly paid brokers to pre-qualify home loan borrowers with Prospect even if the consumer had already pre-qualified for a mortgage with another lender. Splitting fees with a mortgage servicer to obtain consumer referrals. According to the Bureau, Prospect allegedly had an agreement with Planet Home Lending wherein Planet would encourage eligible consumers to refinance into a government-backed Home Affordable Refinance Program (HARP) mortgage through Prospect. Under the agreement, Prospect would compensate Planet for such referrals by splitting the proceeds of the sale of such loans with Planet.

According to the Bureau, Prospect allegedly had an agreement with Planet Home Lending wherein Planet would encourage eligible consumers to refinance into a government-backed Home Affordable Refinance Program (HARP) mortgage through Prospect. Under the agreement, Prospect would compensate Planet for such referrals by splitting the proceeds of the sale of such loans with Planet. Paying brokers to pre-qualify home loan borrowers with Prospect. Prospect compensated brokers for “writing in” the Prospect’s name for any consumer seeking to purchase a listed property, the CFPB said. The company allegedly split fees with Planet Home Lending, a Connecticut mortgage servicer that it hired to identify and help persuade eligible consumers to refinance into a government-backed loan through Prospect.

Under the consent order, Prospect must pay $3.5 million to the CFPB’s Civil Penalty Fund. Prospect is also prohibited from committing future violations of RESPA and enjoined from paying for referrals or entering into agreements with settlement service providers to endorse the use of Prospect’s services.

This is not the first time Prospect has experienced regulatory enforcement action. In 2015, California’s Department of Business Oversight ordered Prospect to pay $10.1 million in restitution and penalties for violations of state and federal law. According to the California regulator’s press release , Prospect inflated settlement service fees and overcharged over 70,000 borrowers during a four-year period.

ReMax Gold Coast and Keller Williams Mid-Willamette

RGC Services, Inc. (doing business as ReMax Gold Coast) is based in Ventura, California. Willamette Legacy, LLC (doing business as Keller Williams Mid-Willamette) is based in Corvallis, Oregon. Both companies are real estate brokers that work with consumers seeking to buy or sell real estate.

According to the press release, the CFPB’s investigation found that the two companies accepted illegal payments for referrals. Both companies were among over 100 real estate brokers that had “improper arrangements” with Prospect.

The consent order filed against Keller Williams Realty Mid-Willamette requires the real estate broker to pay $145,000 in disgorgement and $35,000 in penalties. The consent order filed against ReMax Gold Coast requires ReMax to pay $50,000 in civil money penalties. Both companies are prohibited from paying or accepting payments for referrals, or entering into any agreements with settlement service providers to endorse the use of their services.

Planet Home Lending

Planet Home Lending, LLC is a mortgage servicer headquartered in Meriden, Connecticut.

In 2012, according to the CFPB, Planet Home Lending signed a contract with Prospect that served as a vehicle for the payment of illegal kickbacks. In particular, the Bureau claimed that Planet had accepted fees from Prospect for referring consumers seeking to refinance. Prospect and Planet would evenly split the proceeds from the sale of each mortgage loan originated as a result of a Planet referral.

Planet also used “trigger leads” from a major consumer reporting agency to identify consumers seeking to refinance so it could market Prospect to them. This practice violated the Fair Credit Reporting Act (FCRA) because Planet was not a lender and could not make a firm offer of credit to those consumers.