California Real Estate Fraud Report

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Archive for the 'RESPA Violations' Category

PHH Victory May Undermine the Consumer Financial Protection Bureau (CFPB)

October 13th, 2016 at 10:21am

In a stunning victory, the United States Court of Appeals for the District of Columbia Circuit ruled the structure of the CFPB unconstitutional and vacated a $103 million fine against PHH on Tuesday.

PHH had had a $6.4 million fine levied against it by Administrative Law Judge Cameron Elliot. However, CFPB Director Richard Cordray increased the fine to $103 million, saying that PHH violated the Real Estate Settlement Procedures Act (RESPA) every time it accepted a kickback payment on or before July 21, 2008 – going far beyond Elliot’s ruling, which had limited PHH’s violations to kickbacks that were connected with loans that closed on or after July 21, 2008.

PHH challenged Cordray’s authority to levy the additional fine and the constitutionality of the CFPB, and after much deliberation, the court agreed with PHH on all counts.

Read the full story in HousingWire.

CFPB signals end to wink-and-nod kickbacks between lenders, brokerages, title companies

August 4th, 2015 at 9:26am

Thanks to mortgage broker Dan Dobbs for the following important consumer article.

An article in HousingWire reports that due to recent interpretations of the Real Estate Settlement Practices Act (RESPA) by the Consumer Financial Protection Bureau (CFPB), two large lenders have decided to exit the MSA market. The Lenders are Wells Fargo and Prospect Mortgage.

MSAs are Marketing Service Agreements whereby brokerages encourage their agents to use the services of affiliated businesses, such as title companies or lenders, in which the brokerages either have an ownership or other financial arrangement.

The feds believe that many of these MSAs involve kickbacks and fee-splitting between the various companies and are therefore not in the interests of consumers.

Earlier this year, Wells Fargo and JPMorgan Chase were collectively fined $37.5 million for operating an illegal kickback scheme with now-defunct Genuine Title.

Other lenders are expected to join the MSA exodus. The biggest fear is that the CFPB may go back in time and claw-back exchanges of money for referrals it believes are violations of RESPA.

 

 

Law firm sues J. Rockcliff brokerage for kickbacks on TransactionPoint program

June 12th, 2015 at 2:09pm

La Jolla-based law firm Bottini & Bottini has filed suit against J. Rockcliff, Inc. and Jeffrey W. Sposito for violation of California Civil code 1710 (3), California Business and Prof. Code 17200, fraud and others. The plaintiffs (“Class”) hired J. Rockcliff in the purchase or sale of residences in California between July 1, 2007 and July 11, 2011 and the defendants (the agents or owners) received payments related to Fidelity National Financial‘s TransactionPoint software.

Read the complaint by clicking here.

This lawsuit comes on the heels of similar class action lawsuits against Alain Pinel and Pacific Pinnacle, also filed by Bottini & Bottini.

Fidelity has already settled charges brought by HUD having to do with the TransactionPoint program, by agreeing to pay HUD $4.5 million for alleged violations of RESPA kickbacks.

In the current lawsuit, the plaintiffs are accusing the defendants of accepting undisclosed payments from steering business to one another as real estate agents and other services without disclosing this to the plaintiffs. If true, the various complaints: breaches of fiduciary duties, fraudulent concealment, violation of California’s unfair competition law, constructive fraud and unjust enrichment, could cost the defendants to have to return their full commissions to the plaintiffs.

 

Read the original article in RE-Insider.

CFPB and Maryland Attorney General suing banks and others for RESPA anti-kickback violations

May 1st, 2015 at 11:32am

The Consumer Financial Protection Bureau (CFPB) and the Maryland Attorney General have filed complaints accusing six individuals of taking illegal mortgage kickback scheme with banks such as Wells Fargo and JPMorgan Chase. They are charged of receiving cash and marketing services in exchange for giving mortgage loan referrals to the banks.

The CFPB named the individuals as follows: Jay Zukerberg and Brandon Glickstein, the owner and marketing director respectively of defunct Genuine TitleGary Klopp, Adam Mandelberg,  and Angela Pobletts (all loan officers); and William Peterson, the president of a mortgage brokerage. Genuine Title is accused of paying the loan officers by running the kickbacks through limited liability companies.

“Paying kickbacks for mortgage referrals is illegal, and it has been illegal for decades,” said CFPB Director Richard Cordray in a press release. “Secret and unlawful payments keep consumers in the dark and put honest businesses at a disadvantage, and the consumer bureau will continue to take action against them.”

Click on the Real Estate Settlement Practices Act (RESPA) to learn about its anti-kickback provisions.

Read the original article in National Mortgage News.

CFPB fines NewDay Financial for kickbacks, deceptive mortgage advertising

February 11th, 2015 at 8:43am

The following is a press release by the Consumer Financial Protection Bureau (CFPB):

Today, the Consumer Financial Protection Bureau (CFPB) took action against NewDay Financial, LLC for deceptive mortgage advertising and kickbacks. NewDay deceived consumers about a veterans’ organization’s endorsement of NewDay products and participated in a scheme to pay kickbacks for customer referrals. NewDay will pay a $2 million civil money penalty for its actions.

NewDay profited from the trust that veterans place in their veteran service organization,” said CFPB Director Richard Cordray. “Veterans, and any consumers getting a mortgage, deserve honest information about lender endorsements.”

NewDay is a Maryland-based, nonbank mortgage lender owned by Chrysalis Holdings, a private company. Its primary business is originating refinance mortgage loans guaranteed by the Veterans Benefits Administration. These loans are available exclusively to servicemembers, veterans, and their surviving spouses. NewDay mainly advertises its mortgage products to consumers through direct mail campaigns. Between July 2011 and July 2014, NewDay sent consumers over 50 million mortgage solicitations by postal and electronic mail.

Beginning in 2010, NewDay entered into a marketing arrangement with a veterans’ organization. The arrangement was facilitated by a broker company. As part of that agreement, NewDay paid “lead generation fees” to the veterans’ organization and the broker company. NewDay also paid a $15,000 monthly licensing fee to the broker company. As part of this arrangement, NewDay was named the “exclusive lender” of the veterans’ organization.

In targeted marketing to members of this veterans’ organization, NewDay stated that this title was based on its high standards for service and excellent value. At no point did NewDay disclose to consumers that the veterans’ organization had a financial relationship with NewDay. Under the circumstances, this failure to disclose the relationship constituted a deceptive act or practice, which violates the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).

The direct mail that NewDay sent contained a recommendation from the veterans’ organization to its members. The recommendation urged members to use NewDay’s products, which, together with other telephone and web-based referral activities, constituted a referral of settlement service business. NewDay’s payments to the veterans’ organization and the coordinating company for these referral activities constituted illegal kickbacks in violation of the Real Estate Settlement Procedures Act (RESPA).

Enforcement Action

Under the Dodd-Frank Act, the CFPB has the authority to take action against institutions violating federal consumer financial laws, including by engaging in unfair, deceptive, or abusive acts or practices. NewDay is ending its relationship with the veterans’ organization and the broker company. The CFPB’s order requires that NewDay:

  • End deceptive marketing: NewDay may not engage in deceptive marketing related to mortgage credit products and may not assist others in making misrepresentations.
  • Cease deceptive endorsement relationships: NewDay may not enter into any business relationship that would involve third-party endorsements inconsistent with the Federal Trade Commission’s (FTC) guidance on endorsements and any subsequent guidance issued by the FTC or the Bureau concerning endorsements.
  • End kickbacks: The consent order requires that NewDay fully comply with the law and make no payments for referrals.
  • Pay $2 million in civil penalties: For its conduct, NewDay will make a $2 million penalty payment to the CFPB’s Civil Penalty Fund.

Click to read the Consent Order.

I’m wondering why the “Broker” was not named in the press release or Consent Order and there is no mention as to whether the Broker was also punished or penalized for its participation in this business arrangement.

Fidelity National Title fined by HUD for RESPA kickbacks; brokers face class-action lawsuits

February 4th, 2015 at 5:53pm

Two real estate businesses could be in hot water, according to this article in RE-Insider.

Fidelity National Title Insurance marketed their TransactionPoint program to brokers. This was a “pay-for-click” system that made it possible for brokers to generate revenues for settlement services.

The problem, according to HUD, is that this form of revenue enhancement falls under RESPA kickbacks violations and the agency just fined Fidelity $4.5 million. A second settlement was also reached between the California Department of Insurance and Fidelity National Title Insurance over allegations of illegal kickbacks that were paid out from 2003 to 2011.

RESPA is an abbreviation for the Real Estate Settlement Procedures Act. It is federal law and those found in violation could face stiff financial penalties, loss of their licenses to conduct their businesses and time in federal prison.

RE-Insider wanted to know if any of the money Fidelity made from these deal was used to indemnify brokers who participated in the TransactionPoint program and what the names of the brokers were.

Two of the brokers are now identified, as the La Jolla based law firm, Bottini & Bottini, filed two class action lawsuits on behalf of homeowners in the past month naming over ten individuals at Alain Pinel  and Pacific Pinnacle  for violation of California Civil code 1710 (3), California Business and Prof. Code 17200, fraud and others. Of course, there could be more names coming to the surface.

© Copyright 2007-2017 Monique Bryher

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The information and notices contained on The California Real Estate Fraud Report are intended to summarize recent developments in real estate fraud, mortgage fraud, short sale fraud, REO fraud, appraisal fraud, loan modification scams, loan modification fraud and other real estate related crimes occurring in Los Angeles and California. The posts on this site are presented as general research and information and are expressly not intended, and should not be regarded, as legal advice. Much of the information on this site concerns allegations made in civil lawsuits and in criminal indictments. All persons are presumed innocent until convicted of a crime. Readers who have particular questions about real estate fraud, mortgage fraud and appraisal fraud matters or who believe they require legal counsel should seek the advice of an attorney.

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