Over the past couple of weeks, the CFPB has kept itself busy in the mortgage origination enforcement arena. In one complaint, the CFPB ordered a residential mortgage lender and its CEO to each pay a $1 million civil penalty for compensating loan originators in a way that allegedly steered borrowers into mortgage loans with higher interest rates. Additionally, the company was ordered to pay $18 million in consumer redress. According to the CFPB, the company set up “employee expense accounts” that were funded, in part, based on the interest rates of loans closed by each originator, which violates the loan originator compensation rules that have been enforced since July 2011.
In another enforcement action, the CFPB joined the Department of Justice (DOJ) in ordering a wholesale mortgage lender to pay $9 million in monetary relief to borrowers for alleged Fair Housing Act (FHA) and Equal Credit Opportunity Act (ECOA) violations. Based on the filed complaint, these violations resulted from a pricing policy that gave the company’s loan brokers a high level of discretion in setting interest rates and fees for mortgage loans. Higher interest rates charged led to higher yield spread premiums for the brokers. The CFPB and the DOJ contend that this policy led to African American and Hispanic borrowers being charged more in total broker fees than white borrowers based on race rather than overall credit risk.