Prospect Mortgage to Pay $3.5 Million Fine for Illegal Kickback Scheme

The CFPB’s investigation found that ReMax Gold Coast and Keller Williams Mid-Willamette accepted illegal payment for referrals

By Jeff Sorg, OnlineEd Blog

kickback bills(February 1, 2017) –  The Consumer Financial Protection Bureau (CFPB) on Tuesday took action against Prospect Mortgage, LLC, a major mortgage lender, for paying illegal kickbacks for mortgage business referrals. The CFPB also took action against two real estate brokers and a mortgage servicer that took illegal kickbacks from Prospect. Under the terms of the action announced today, Prospect will pay a $3.5 million civil penalty for its illegal conduct, and the real estate brokers and servicer will pay a combined $495,000 in consumer relief, repayment of ill-gotten gains, and penalties.

“Today’s action sends a clear message that it is illegal to make or accept payments for mortgage referrals,” said CFPB Director Richard Cordray. “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, LLC, headquartered in Sherman Oaks, Calif., is one of the largest independent retail mortgage lenders in the United States, with nearly 100 branches nationwide. RGC Services, Inc., (doing business as ReMax Gold Coast), based in Ventura, Calif., and Willamette Legacy, LLC, (doing business as Keller Williams Mid-Willamette), based in Corvallis, Ore., are two of more than 100 real estate brokers with which Prospect had improper arrangements. Planet Home Lending, LLC is a mortgage servicer headquartered in Meriden, Conn., that referred consumers to Prospect Mortgage and accepted fees in return.

The CFPB is responsible for enforcing the Real Estate Settlement Procedures Act, which was enacted in 1974 as a response to abuses in the real estate settlement process. A primary purpose of the law is to eliminate kickbacks or referral fees that tend to increase unnecessarily the costs of certain settlement services. The law covers any service provided in connection with a real estate settlement, such as title insurance, appraisals, inspections, and loan origination.

Prospect Mortgage

Prospect Mortgage offers a range of mortgages to consumers, including conventional, FHA, and VA loans. From at least 2011 through 2016, Prospect Mortgage used a variety of schemes to pay kickbacks for referrals of mortgage business in violation of the Real Estate Settlement Procedures Act. For example, Prospect established marketing services agreements with companies, which were framed as payments for advertising or promotional services, but in this case actually served to disguise payments for referrals. Specifically, the CFPB found that Prospect Mortgage:

  • Paid for referrals through agreements: Prospect maintained various agreements with over 100 real estate brokers, including ReMax Gold Coast and Keller Williams Mid-Willamette, which served primarily as vehicles to deliver payments for referrals of mortgage business. Prospect tracked the number of referrals made by each broker and adjusted the amounts paid accordingly. Prospect also had other, more informal, co-marketing arrangements that operated as vehicles to make payments for referrals.
  • Paid brokers to require consumers – even those who had already prequalified with another lender – to prequalify with Prospect: One particular method Prospect used to obtain referrals under their lead agreements was to have brokers engage in a practice of “writing in” Prospect into their real estate listings. “Writing in” meant that brokers and their agents required anyone seeking to purchase a listed property to obtain prequalification with Prospect, even consumers who had prequalified for a mortgage with another lender.
  • Split fees with a mortgage servicer to obtain consumer referrals: Prospect and Planet Home Lending had an agreement under which Planet worked to identify and persuade eligible consumers to refinance with Prospect for their Home Affordable Refinance Program (HARP) mortgages. Prospect compensated Planet for the referrals by splitting the proceeds of the sale of such loans evenly with Planet. Prospect also sent the resulting mortgage servicing rights back to Planet.

Under the consent order issued today, Prospect will pay $3.5 million to the CFPB’s Civil Penalty Fund for its illegal kickback schemes. The company is prohibited from future violations of the Real Estate Settlement Procedures Act, will not pay for referrals, and will not enter into any agreements with settlement service providers to endorse the use of their services.

The consent order filed against Prospect Mortgage is available at: http://files.consumerfinance.gov/f/documents/201701_cfpb_ProspectMortgage-consent-order.pdf

ReMax Gold Coast and Keller Williams Mid-Willamette

ReMax Gold Coast and Keller Williams Mid-Willamette are real estate brokers that work with consumers seeking to buy or sell real estate. Brokers or agents often make recommendations to their clients for various services, such as mortgage lending, title insurance, or home inspectors. Among other things, the Real Estate Settlement Procedures Act prohibits brokers and agents from exploiting consumers’ reliance on these recommendations by accepting payments or kickbacks in return for referrals to particular service providers.

The CFPB’s investigation found that ReMax Gold Coast and Keller Williams Mid-Willamette accepted illegal payment for referrals. Both companies were among more than 100 brokers who had marketing services agreements, lead agreements, and desk-license agreements with Prospect, which were, in whole or in part, vehicles to obtain illegal payments for referrals.

Under the consent orders filed today, both companies are prohibited from violating the Real Estate Settlement Procedures Act, will not pay or accept payment for referrals, and will not enter into any agreements with settlement service providers to endorse the use of their services. ReMax Gold Coast will pay $50,000 in civil money penalties, and Keller Williams Mid-Willamette will pay $145,000 in disgorgement and $35,000 in penalties.

The consent order filed against ReMax Gold Coast is available at: http://files.consumerfinance.gov/f/documents/201701_cfpb_RGCServices-consent-order.pdf

The consent order filed against Keller Williams Mid-Willamette is available at:http://files.consumerfinance.gov/f/documents/201701_cfpb_Willamette-Legacy-consent-order.pdf

Planet Home Lending

In 2012, Planet Home Lending signed a contract with Prospect Mortgage that facilitated the payment of illegal referral fees. The company’s practices violated the Real Estate Settlement Procedures Act and the Fair Credit Reporting Act. Specifically, the CFPB found that Planet Home Lending:

  • Accepted fees from Prospect for referring consumers seeking to refinance: Under their arrangement, Planet Home Lending took half the proceeds earned by Prospect for the sale of each mortgage loan originated as a result of a referral from Planet. Planet also accepted the return of the mortgage servicing rights of that consumer’s new mortgage loan.
  • Unlawfully used “trigger leads” to market to Prospect to consumers: Planet ordered “trigger leads” from one of the major consumer reporting agencies to identify which of its consumers were seeking to refinance so it could market Prospect to them. This was a prohibited use of credit reports under the Fair Credit Reporting Act because Planet was not a lender and could not make a firm offer of credit to those consumers.

Under the consent order filed against Planet Home Lending, the company will directly pay harmed consumers a total of $265,000 in redress. The company is also prohibited from violating the Fair Credit Reporting Act and the Real Estate Settlement Procedures Act, will not pay or accept payment for referrals, and will not enter into any agreements with settlement service providers to endorse the use of their services.

The consent order filed against Planet Home Lending is available at: http://files.consumerfinance.gov/f/documents/201701_cfpb_PlanetHomeLending-consent-order.pdf

[Source: CFPB press release]

 

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For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

All information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

OnlineEd® is a registered Trademark

OnlineEd® Receives OREF Award at Portland Metropolitan Association REALTORS® Luncheon

OnlineEd® receives Partnership and Outreach Award

By Jeff Sorg, OnlineEd Blog

(Januaharlow_1ary 24, 2017) –  (Portland, OR)  OnlineEd® president, Harlow Spaan, received the Partnership and Outreach Award from Oregon Real Estate Forms, LLC (OREF) for OnlineEd’s three years of on-line curriculum outreach at the 2017 Portland Metropolitan Association REALTORS® (PMAR) luncheon at Portland’s Multnomah Athletic Club.

“OREF, LLC appreciates the advancement of forms usage continuing education. The OnlineEd team provided quality on-line curriculum for Oregon brokers and OREF subscribers in short order after our OREF instructors Jeff Wiren of Premiere Property Group and Steve Russell of Windermere Stellar recorded the four courses,”  Said Lance Clark, CAE, CEO of Oregon Real Estate Forms, LLC who presented the award to Mr. Spaan.

Subscribers to OREF are primarily comprised of members of the Oregon Association of REALTORS®.

Click here to sign up for the OnlineEd free OREF 4-Course CE Package.

In 2016, approximately 3,700 Oregon brokers and  OREF subscribers earned 3-hours of free continuing education for license renewal from OnlineEd® by completing the 2016 Residential Sale Agreement and Matrix on-line curriculum.  The ongoing Continuing Education outreach for subscribers during the November 2016 – April 2017 education cycle includes another four hours of FREE CE from OnlineEd® with courses in the following OREF forms:

  1. Agreements to Occupy Before and After Closing,
  2. Seller’s Property Disclosure Statement,
  3. Private Well and On-Site Sewage System Addenda, and
  4. 2017 Residential Sale Agreement Updates.”

Click here to sign up for the OnlineEd free OREF 4-Course Package.

The PMAR event includes the annual installation of the incoming PMAR President and Realtor® of the Year presentation; this year Kerri Hartnett of Keller Williams Central was installed President and Jeff Wiren of Premiere Property Group was bestowed the Realtor® of the Year award.

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For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

All information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

OnlineEd® is a registered Trademark

CITI Subsidiaries to Pay $28.8 Million for Giving the Runaround to Borrowers Trying to Save Their Homes

Mortgage Servicers Kept Borrowers in the Dark About Options, Demanded Excessive Paperwork

By Jeff Sorg, OnlineEd Blog

briefcase with money(January 23, 2017) – The Consumer Financial Protection Bureau (CFPB) today took separate actions against CitiFinancial Servicing and CitiMortgage, Inc. for giving the runaround to struggling homeowners seeking options to save their homes. The mortgage servicers kept borrowers in the dark about options to avoid foreclosure or burdened them with excessive paperwork demands in applying for foreclosure relief. The CFPB is requiring CitiMortgage to pay an estimated $17 million to compensate wronged consumers, and pay a civil penalty of $3 million; and requiring CitiFinancial Services to refund approximately $4.4 million to consumers, and pay a civil penalty of $4.4 million.

“Citi’s subsidiaries gave the runaround to borrowers who were already struggling with their mortgage payments and trying to save their homes,” said CFPB Director Richard Cordray. “Consumers were kept in the dark about their options or burdened with excessive paperwork. This action will put money back in consumers’ pockets and make sure borrowers can get help they need.” 

CitiFinancial Servicing
CitiFinancial Servicing is made up of four entities incorporated in Delaware, Minnesota, and West Virginia, and headquartered in O’Fallon, Mo. All are direct subsidiaries of CitiFinancial Credit Company, and an indirect subsidiary of New York-based Citigroup, Inc. As a mortgage servicer, CitiFinancial Servicing collects payments from borrowers for loans it originates. It also handles customer service, collections, loan modifications, and foreclosures.

CitiFinancial Servicing originates and services residential daily simple interest mortgage loans. With these loans, the interest amount due is calculated on a day-to-day basis, unlike a typical mortgage, where interest is calculated monthly. With a daily simple interest loan, the consumer owes less interest and pays more toward principal when they make monthly payments before the due date. But if payments are late or irregular, more of the consumer’s payment goes to pay interest. Some consumers who notified CitiFinancial Servicing that they faced a financial hardship were offered “deferments.” This postponed the consumer’s next payment due date, and the consumer could still be considered current on payments. But CitiFinancial Servicing did not treat a deferment as a request for foreclosure relief options, also called loss mitigation options, as required by CFPB mortgage servicing rules.

CitiFinancial Servicing violated the Real Estate Settlement Procedures Act, the Fair Credit Reporting Act, and the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibition on deceptive acts or practices. Specifically, CitiFinancial Servicing:

  • Kept consumers in the dark about foreclosure relief options: When borrowers applied to have their payments deferred, CitiFinancial Servicing failed to consider it as a request for foreclosure relief options. As a result, borrowers may have missed out on options that may have been more appropriate for them. Such requests for foreclosure relief trigger protections required by CFPB mortgage servicing rules. The rules include helping borrowers complete their applications and considering them for all available foreclosure relief alternatives.
  • Misled consumers about the impact of deferring payment due dates:Consumers were kept in the dark about the true impact of postponing a payment due date. CitiFinancial Servicing misled borrowers into thinking that if they deferred the payment, the additional interest would be added to the end of the loan rather than become due when the deferment ended. In fact, the deferred interest became due immediately. As a result, more of the borrowers’ payment went to pay interest on the loan instead of principal when they resumed making payments. This made it harder for borrowers to pay down their loan principal.
  • Charged consumers for credit insurance that should have been canceled: Some borrowers bought CitiFinancial Servicing credit insurance, which is meant to cover the loan if the borrower can’t make the payments. Borrowers paid the credit insurance premium as part of their mortgage payment. Under its terms, CitiFinancial Servicing was supposed to cancel the insurance if the borrower missed four or more monthly payments. But between July 2011 and April 30, 2015, about 7,800 borrowers paid for credit insurance that CitiFinancial Servicing should have canceled under those terms. These payments were still directed to insurance premiums instead of unpaid interest, making it harder for borrowers to pay down their loan principal.
  • Prematurely canceled credit insurance for some borrowers: CitiFinancial Servicing prematurely canceled credit insurance for some consumers. Some of those borrowers later had claims denied because CitiFinancial Servicing had improperly canceled their insurance.
  • Sent inaccurate consumer information to credit reporting companies: CitiFinancial Servicing incorrectly reported some settled accounts as being charged off. A charged-off account is one the bank deems unlikely to be repaid, but may sell to a debt buyer. At times, the servicer continued to send inaccurate information about these accounts to credit reporting companies, and didn’t correct bad information it had already sent.
  • Failed to investigate consumer disputes: CitiFinancial did not investigate consumer disputes about incorrect information sent to credit reporting companies within the required time period. In some instances, they ignored a “notice of error” sent by consumers, which should have stopped the servicer from sending negative information to credit reporting companies for 60 days.

Under the consent order, CitiFinancial Servicing must:

  • Pay $4.4 million in restitution to consumers: CitiFinancial Services must pay $4.4 million to wronged consumers who were charged premiums on credit insurance after it should be been canceled, or who were denied claims for insurance that was canceled prematurely.
  • Clearly disclose conditions of deferments for loans: CitiFinancial Servicing must make clear to consumers that interest accruing on daily simple interest loans during the deferment period becomes immediately due when the borrower resumes making payments. This means more of the borrowers’ loan payment will go toward paying interest instead of principal. CitiFinancial Servicing must also treat a consumer’s request for a deferment as a request for a loss mitigation option under the Bureau’s mortgage servicing rules.
  • Stop supplying bad information to credit reporting companies: CitiFinancial Servicing must stop reporting settled accounts as charged off to credit report companies, and stop sending negative information to those companies within 60 days after receiving a notice of error from a consumer. CitiFinancial Servicing must also investigate direct disputes from borrowers within 30 days.
  • Pay a civil money penalty: CitiFinancial Servicing must pay $4.4 million to the CFPB Civil Penalty Fund for illegal acts. 

The consent order against Citi Financial Services is available at: http://files.consumerfinance.gov/f/documents/201701_cfpb_CitiFinancial-consent-order.pdf

CitiMortgage
CitiMortgage is incorporated in New York, headquartered in O’Fallon, Mo., and is a subsidiary of Citibank, N.A. CitiMortgage is a mortgage servicer for Citibank and government-sponsored entities such as Fannie Mae and Freddie Mac. It also fields consumer requests for foreclosure relief, such as repayment plans, loan modification, or short sales.

Borrowers at risk of foreclosure or otherwise struggling with their mortgage payments can apply to their servicer for foreclosure relief. In this process, the servicer requests documentation of the borrower’s finances for evaluation. Under CFPB rules, if a borrower does not submit all the required documentation with the initial application, servicers must let the borrowers know what additional documents are required and keep copies of all documents that are sent.

However, some borrowers who asked for assistance were sent a letter by CitiMortgage demanding dozens of documents and forms that had no bearing on the application or that the consumer had already provided. Many of these documents had nothing to do with a borrower’s financial circumstances and were actually not needed to complete the application. Letters sent to borrowers in 2014 requested documents with descriptions such as “teacher contract,” and “Social Security award letter.” CitiMortgage sent such letters to about 41,000 consumers.

In doing so, CitiMortgage violated the Real Estate Settlement Procedures Act, and the Dodd-Frank Act’s prohibition against deceptive acts or practices. Under the terms of the consent order, CitiMortgage must:

  • Pay $17 million to wronged consumers: CitiMortgage must pay $17 million to  approximately 41,000 consumers who received improper letters from CitiMortgage. CitiMortgage must identify affected consumers and mail each a bank check of the amount owed, along with a restitution notification letter.
  • Clearly identify documents consumers need when applying for foreclosure relief: If it does not get sufficient information from borrowers applying for foreclosure relief, CitiMortgage must comply with the Bureau’s mortgage servicing rules. The company must clearly identify specific documents or information needed from the borrower and whether any information needs to be resubmitted. Or it must provide the forms that a borrower must complete with the application, and describe any documents borrowers have to submit.
  • Freeze any foreclosures related to the flawed application process and reach out to harmed consumers: For consumers covered under the order who never received a decision on their application, CitiMortgage must stop all foreclosure-related activity, and reach out to these borrowers to determine if they want foreclosure relief options.
  • Pay a civil money penalty: CitiMortgage must pay $3 million to the CFPB Civil Penalty Fund for illegal acts.

The consent order reflects that CitiMortgage took affirmative steps to reach out to some borrowers before it may have been required to by CFPB rules. While those borrowers also would have benefited from more tailored and accurate notices, and the institution will provide compliant notices to them going forward, those individuals were not included the affected group of consumers in this settlement. This will avoid penalizing the institution for making additional effort, which the Bureau encourages other institutions to make as well.   

The consent order against CitiMortgage is available at: http://files.consumerfinance.gov/f/documents/201701_cfpb_CitiMortgage-consent-order.pdf

[Source: CFPB press release]

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For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

All information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

OnlineEd® is a registered Trademark

Categories: Mortgage, Real Estate Tags: ,

New Administration Suspends FHA Mortage Insurance Rate Cut

canstockphoto18896192 suspended

UPDATE: HUD suspends FHA mortgage insurance rate cut 

Go Here: http://www.latimes.com/business/la-fi-trump-fha-cut-20170120-story.html

 

FHA’s reduction in premium rates is an appropriate measure to support the path to the American dream

By Jeff Sorg, OnlineEd Blog

(January 13, 2017) – As the nation’s housing market continues to improve, U.S. Housing and Urban Development Secretary Julián Castro announced the Federal Housing Administration (FHA) will reduce the annual premiums most borrowers will pay by a quarter of a percent.  FHA’s new premium rates are projected to save new FHA-insured homeowners an average of $500 this year.

FHA is reducing its annual mortgage insurance premium (MIP) by 25 basis points for most new mortgages with a closing/disbursement date on or after January 27, 2017.  For a full schedule of the new premium rates announced today, read FHA’s mortgagee letter.

This action reflects the fourth straight year of improved economic health of FHA’s Mutual Mortgage Insurance Fund (MMIF), which gained $44 billion in value since 2012.  Last year alone, an independent actuarial analysis found the MMI Fund’s capital ratio grew by $3.8 billion and now stands at 2.32 percent of all insurance in force—the second consecutive year since 2008 that FHA’s reserve ratio exceeded the statutorily required two percent threshold.

Secretary Castro said FHA’s action reflects today’s risk environment and comes at the right time for consumers who are facing higher credit costs as mortgage interest rates are increasing.

“After four straight years of growth and with sufficient reserves on hand to meet future claims, it’s time for FHA to pass along some modest savings to working families,” said Secretary Castro.  “This is a fiscally responsible measure to price our mortgage insurance in a way that protects our insurance fund while preserving the dream of homeownership for credit-qualified borrowers.”

Ed Golding, Principal Deputy Assistant Secretary for HUD’s Office of Housing added, “We’ve carefully weighed the risks associated with lower premiums with our historic mission to provide safe and sustainable mortgage financing to responsible homebuyers.  Homeownership is the way most middle-class Americans build wealth and achieve financial security for themselves and their families.  This conservative reduction in our premium rates is an appropriate measure to support them on their path to the American dream.”

In the wake of the nation’s housing crisis, FHA increased its premium prices numerous times to help stabilize the health of its MMI Fund.  Since 2010, FHA had raised annual premiums 150 percent which helped to restore capital reserves but significantly increased the cost of credit to qualified borrowers.  This step restores the annual premium to close to its pre-housing-crisis level.

This action is expected to lower the cost of housing for the approximately 1 million households who are expected to purchase a home or refinance their mortgages using FHA-insured financing in the coming year.

Categories: Mortgage, Real Estate

FHA to Reduce Annual Insurance Premiums on Most Mortgages

hudFHA’s reduction in premium rates is an appropriate measure to support the path to the American dream

By Jeff Sorg, OnlineEd Blog

(January 13, 2017) – As the nation’s housing market continues to improve, U.S. Housing and Urban Development Secretary Julián Castro announced the Federal Housing Administration (FHA) will reduce the annual premiums most borrowers will pay by a quarter of a percent.  FHA’s new premium rates are projected to save new FHA-insured homeowners an average of $500 this year.

FHA is reducing its annual mortgage insurance premium (MIP) by 25 basis points for most new mortgages with a closing/disbursement date on or after January 27, 2017.  For a full schedule of the new premium rates announced today, read FHA’s mortgagee letter.

This action reflects the fourth straight year of improved economic health of FHA’s Mutual Mortgage Insurance Fund (MMIF), which gained $44 billion in value since 2012.  Last year alone, an independent actuarial analysis found the MMI Fund’s capital ratio grew by $3.8 billion and now stands at 2.32 percent of all insurance in force—the second consecutive year since 2008 that FHA’s reserve ratio exceeded the statutorily required two percent threshold.

Secretary Castro said FHA’s action reflects today’s risk environment and comes at the right time for consumers who are facing higher credit costs as mortgage interest rates are increasing.

“After four straight years of growth and with sufficient reserves on hand to meet future claims, it’s time for FHA to pass along some modest savings to working families,” said Secretary Castro.  “This is a fiscally responsible measure to price our mortgage insurance in a way that protects our insurance fund while preserving the dream of homeownership for credit-qualified borrowers.”

Ed Golding, Principal Deputy Assistant Secretary for HUD’s Office of Housing added, “We’ve carefully weighed the risks associated with lower premiums with our historic mission to provide safe and sustainable mortgage financing to responsible homebuyers.  Homeownership is the way most middle-class Americans build wealth and achieve financial security for themselves and their families.  This conservative reduction in our premium rates is an appropriate measure to support them on their path to the American dream.”

In the wake of the nation’s housing crisis, FHA increased its premium prices numerous times to help stabilize the health of its MMI Fund.  Since 2010, FHA had raised annual premiums 150 percent which helped to restore capital reserves but significantly increased the cost of credit to qualified borrowers.  This step restores the annual premium to close to its pre-housing-crisis level.

This action is expected to lower the cost of housing for the approximately 1 million households who are expected to purchase a home or refinance their mortgages using FHA-insured financing in the coming year.

[Source: HUD press release]

 

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HUD’s mission is to create strong, sustainable, inclusive communities and quality affordable homes for all.

For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

All information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

OnlineEd® is a registered Trademark

Categories: Mortgage, Real Estate Tags: , , ,

CFPB Orders TransUnion and Equifax to Pay $23.1 Million for Deceiving Consumers

“TransUnion and Equifax deceived consumers . . .”

By Jeff Sorg, OnlineEd Blog

(January 3, 2017) – The Consumer Financial Protection Bureau (CFPB) today took action against Equifax, Inc., TransUnion, and their subsidiaries for deceiving consumers about the usefulness and actual cost of credit scores they sold to consumers. The companies also lured consumers into costly recurring payments for credit-related products with false promises. The CFPB ordered TransUnion and Equifax to truthfully represent the value of the credit scores they provide and the cost of obtaining those credit scores and other services. Between them, TransUnion and Equifax must pay a total of more than $17.6 million in restitution to consumers, and fines totaling $5.5 million to the CFPB.

“TransUnion and Equifax deceived consumers about the usefulness of the credit scores they marketed, and lured consumers into expensive recurring payments with false promises,” said CFPB Director Richard Cordray. “Credit scores are central to a consumer’s financial life and people deserve honest and accurate information about them.”

Chicago-based TransUnion and Atlanta-based Equifax are two of the nation’s three largest credit reporting agencies. TransUnion and Equifax collect credit information, including a borrower’s payment history, debt load, maximum credit limits, names and addresses of current creditors, and other elements of their credit relationships. These generate credit reports and scores that are provided to businesses. Through their subsidiaries, TransUnion Interactive and Equifax Consumer Services, the companies also market, sell, or provide credit-related products directly to consumers, such as credit scores, credit reports, and credit monitoring.

Credit scores are numerical summaries designed to predict consumer payment behavior in using credit. Many lenders and other commercial users rely in part on these scores when deciding whether to extend credit. No single credit score or credit score model is used by every lender. Lenders use an array of credit scores, which vary by score provider and scoring model. The scores that TransUnion sells to consumers are based on a model from VantageScore Solutions, LLC. Although TransUnion has marketed VantageScores to lenders and other commercial users, VantageScores are not typically used for credit decisions. Scores Equifax sold to consumers were based on Equifax’s proprietary model, the Equifax Credit Score, which is an “educational” credit score that also is typically not used by lenders to make credit decisions.

TransUnion, since at least July 2011, and Equifax, between July 2011 and March 2014, violated the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act by:

  • Deceiving consumers into enrolling in subscription programs: In their advertising, TransUnion and Equifax falsely claimed that their credit scores and credit-related products were free or, in the case of TransUnion, cost only “$1.” In reality, consumers who signed up received a free trial of seven or 30 days, after which they were automatically enrolled in a subscription program. Unless they cancelled during the trial period, consumers were charged a recurring fee – usually $16 or more per month. This billing structure, known as a “negative option,” was not clearly and conspicuously disclosed to consumers.

Equifax also violated the Fair Credit Reporting Act, which requires a credit reporting agency to provide a free credit report once every 12 months and to operate a central source – AnnualCreditReport.com – where consumers can get their report. Until January 2014, consumers getting their report through Equifax first had to view Equifax advertisements. This violates the Fair Credit Reporting Act, which prohibits such advertising until after consumers receive their report.

Enforcement Action
Under the Dodd-Frank Act, the CFPB is authorized to take action against institutions engaged in unfair, deceptive, or abusive acts or practices, or that otherwise violate federal consumer financial laws. Under the consent orders, TransUnion and Equifax must:

  • Pay more than $17.6 million in total restitution to harmed consumers: TransUnion must provide more than $13.9 million in restitution to affected consumers. Equifax must provide almost $3.8 million in restitution to affected consumers. The companies must send notification letters about the restitution to affected consumers.
  • Truthfully represent the usefulness of credit scores it sells: TransUnion and Equifax must clearly inform consumers about the nature of the scores they are selling to consumers.
  • Obtain the express informed consent of consumers: Before enrolling a consumer in any credit-related product with a negative option feature, TransUnion and Equifax must obtain the consumer’s consent.
  • Provide an easy way to cancel products and services: TransUnion and Equifax must give consumers a simple, easy-to-understand way to cancel the purchase of any credit-related product, and stop billing and collecting payments for any recurring charge when a consumer cancels.
  • Pay $5.5 million in total penalties: TransUnion must pay $3 million to the Bureau’s civil penalty fund. Equifax must pay $2.5 million to the Bureau’s civil penalty fund.

The full text of the CFPB’s Consent Order against Equifax is here:http://files.consumerfinance.gov/f/documents/201701_cfpb_Equifax-consent-order.pdf

The full text of the CFPB’s Consent Order against TransUnion is here:http://files.consumerfinance.gov/f/documents/201701_cfpb_Transunion-consent-order.pdf

More information about credit scores can be found here:http://www.consumerfinance.gov/about-us/blog/what-you-need-know-understanding-why-offers-your-credit-score-are-not-all-same/

[Source: CFPB Press Release]

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For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

All information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

OnlineEd® is a registered Trademark

Categories: Real Estate Tags: ,

Los Angeles Housing Market is the Most Valuable Metro Area, Worth $2.5 Trillion

U.S. housing market regains value lost during the housing crisis

By Jeff Sorg, OnlineEd Blog

canstockphoto15953582-los-angeles(December 30, 2016) – Zillow® is reporting that the housing market saw a strong year of appreciation, growing 5.7 percent in value, or $1.6 trillion.

The U.S. housing market has regained all the value lost during the housing crisis. The cumulative value of all homes in the U.S. declined by $6.4 trillion between 2006 and 2012 as the housing market collapsed.

A home is typically the biggest part of an individual or family’s wealth, and the cumulative value of the U.S. residential housing stock is similarly significant to the national economy. The U.S. GDP is an estimated $18.7 trillioni, nearly $10 trillion less than the value of all homes in the country.

Los Angeles and New York metros hold the highest shares of the country’s overall housing value, at 8.6 percent and 8 percent, respectively. The next most valuable metro is San Francisco, worth 4.2 percent of the overall housing value.

While several markets are now more valuable than they were at the height of the housing bubble, about 60 percent of the markets in the U.S. are still below the maximum values reached during the bubble years. For example, Chicago is still about $134 billion below the highest value it reached in 2006.

“Housing is incredibly important to us personally and to the economy as a whole,” said Zillow Chief Economist Dr. Svenja Gudell. “The U.S. housing stock is worth more than ever, which is a sign of the ongoing housing recovery. As buying a home gets more expensive, affordability remains a concern for many, and these numbers highlight just how much people are spending on housing. The total value of the housing stock grew nearly 6 percent this year, a pace that will likely mean some American families are priced out of homeownership.”

Renters this year paid $478.5 billionii, a $17.7 billion increase from 2015. About 635,000 new renter households formed in 2016, contributing to the amount of rent spent even as rent appreciation slowed. Apartment renters spent nearly $50 billion more than renters of single-family homes, as more multifamily construction became available this year.

Renters in the New York/Northern New Jersey metro paid the most this year, spending nearly $55 billion on rent.

Metropolitan Area  Total Home Value, Year-End 2016 Total Rent Paid, Year-End 2016
United States  $29.6 trillion $478.5 billion
New York/Northern New Jersey  $2.4 trillion $54.6 billion
Los Angeles-Long Beach-Anaheim, CA  $2.5 trillion $38.6 billion
Chicago, IL  $772.7 billion $14.9 billion
Dallas-Fort Worth, TX  $456.9 billion $11.1 billion
Philadelphia, PA  $589.2 billion $8.5 billion
Houston, TX  $373.2 billion $10.5 billion
Washington, DC  $975.1 billion $14.4 billion
Miami-Fort Lauderdale, FL  $818.8 billion $12.3 billion
Atlanta, GA  $413.6 billion $8.4 billion
Boston, MA  $672.7 billion $10.3 billion
San Francisco, CA  $1.3 trillion $15.8 billion
Detroit, MI  $288.7 billion $4.9 billion
Riverside, CA  $440 billion $7.2 billion
Phoenix, AZ  $441.5 billion $7.1 billion
Seattle, WA  $571.4 billion $8.8 billion
Minneapolis-St Paul, MN  $332.5 billion $5.1 billion
San Diego, CA  $596 billion $9.6 billion
St. Louis, MO  $192 billion $3 billion
Tampa, FL  $254.7 billion $5 billion
Baltimore, MD  $287.9 billion $4.3 billion
Denver, CO  $377.5 billion $5.8 billion
Pittsburgh, PA  $148 billion $2.3 billion
Portland, OR  $286.6 billion $4.5 billion
Charlotte, NC  $186.1 billion $3.2 billion
Sacramento, CA  $269.4 billion $4.4 billion
San Antonio, TX  $116.4 billion $3 billion
Orlando, FL  $187.5 billion $3.8 billion
Cincinnati, OH  $128.6 billion $2.4 billion
Cleveland, OH  $116.8 billion $2.3 billion
Kansas City, MO  $129.7 billion $2.7 billion
Las Vegas, NV  $175.9 billion $4 billion
Columbus, OH  $132.9 billion $2.7 billion
Indianapolis, IN  $111.7 billion $2.4 billion
San Jose, CA  $636.2 billion $6.3 billion
Austin, TX  $161.4 billion N/A

[Source: Zillow]

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Zillow is a registered trademark of Zillow, Inc.

For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit  www.OnlineEd.com.

All information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

OnlineEd® is a registered Trademark

Advertising Guidelines for Oregon Real Estate Brokers

Oregon’s definition of advertising by real estate licensees includes all forms of promotion and solicitation

By Jeff Sorg, OnlineEd Blog

canstockphoto8435391-social-media-phone(December 29, 2016) –  Oregon’s definition of advertising by real estate licensees includes all forms of promotion and solicitation distributed in any manner and by any means for any purpose related to all professional real estate activity. This definition includes advertising by mail; telephone, cellular telephone, robocalling or telephonic advertising; the Internet, E-mail, electronic bulletin board, social media and other similar electronic systems; and business cards, signs, lawn signs, and billboards. Here are some important points to remember when advertising:

  • Don’t lead the public to believe that you have a level of expertise greater than you actually have.
  • Don’t claim or imply a license status other than the one you hold.
  • Design all advertising to be truthful and not be misleading.
  • Get the written permission of the property owner before advertising that owner’s property.
  • Include your license type in your advertising.
  • When using your name in advertising, be sure to prominently include the registered business name of your principal broker or property manager.
  • Submit all proposed advertising to your principal broker for review and approval before publication.
  • Keep a record of your principal broker’s approval of your advertising so it can be made available to the Oregon Real Estate Agency if requested. The burden of keeping advertising records and proving compliance is with the licensee.
  • When advertising personally owned real estate, disclose that you are a licensee.
  • Make certain the first page of your electronic communications includes your licensed name, your principal broker’s licensed or registered business name, and a statement that you are an Oregon real estate licensee. As long as the first e-mail communication includes the necessary disclosure relating to your status and identifies your principal broker, subsequent email communications are exempt from this rule.
  • Team advertising is permitted so long as the team name used does not constitute an unlawful use of a trade name or is too similar to another name by which another person is legally authorized to do business. The team or group must include at least one licensee, and all licensed members of the team must be associated with the same principal broker.
  • Do not guarantee future profits in any advertising.

NOTE: Sponsored links on a search engine are not considered advertising and are exempt from these rules because the search link is outside of the control of the licensee.

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For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

All information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

OnlineEd® is a registered Trademark

Deutsche Bank Agrees to Pay $7.2 Billion for RMBS and Related Activities

Deutsche Bank to pay $7.4 billion for residential mortgage-backed securities and related activities.

By Jeff Sorg, OnlineEd Blog

canstockphoto16214036-gold-bars(December 27, 2016) – Deutsche Bank announced December 23rd that it had reached a settlement in principle with the Department of Justice in the United States regarding civil claims that the DoJ considered in connection with the bank’s issuance and underwriting of residential mortgage-backed securities (RMBS) and related securitization activities between 2005 and 2007. Under the terms of the settlement agreement, Deutsche Bank agreed to pay a civil monetary penalty of US dollar 3.1 billion and to provide US dollar 4.1 billion in consumer relief in the United States. The consumer relief is expected to be primarily in the form of loan modifications and other assistance to homeowners and borrowers, and other similar initiatives to be determined, and delivered over a period of at least five years.

The settlement is subject to the negotiation of definitive documentation, and there can be no assurance that the U.S. Department of Justice and the bank will agree on the final documentation.

[Source: Deutsche Bank]

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For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

All information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

OnlineEd® is a registered Trademark

Home Values Appreciated at Their Fastest Annual Pace Since August 2006

Portland home values rose 14 percent to a median value of $351,800

By Jeff Sorg, OnlineEd Blog

housing graph 3(December 23, 2016) –  In November, national home values rose at their fastest annual pace since 2006, near the peak of the housing bubble. The Zillow® Home Value Index (ZHVI) is $192,500, 2 percent shy of the records set in 2007, according to the November Zillow Real Estate Market Reportsii.

Rents, which were the big story of 2016 as they rose at a record pace, have slowed considerably to a 1.5 percent annual appreciation rate; this rate is expected to continue into 2017. The median monthly rent payment in the U.S. is now $1,403.

Home values were 6.5 percent higher this November than last. Strong growth is especially evident in a handful of new powerhouse markets, including Seattle, Denver, Portland and Dallas, whose strong job markets attracted new home buyers over the last year.

At their fastest pace, home values across the country were appreciating about 11 percent year-over-year. When the bubble burst, home values plummeted, falling 7.4 percent year-over-year during the depths of the crisis, and then began a steady recovery in 2012.

“Home value growth continues to be strong, supported by solid buyer demand and still limited for-sale inventory in many markets across the country,” said Zillow Chief Economist Dr. Svenja Gudell. “Conditions today are very different than the ones we saw back in 2006, which was the last time we saw home values rising this fast. Rampant real estate speculation and loose mortgage credit have been replaced by the sound economic fundamentals we are seeing now.”

Portland, Seattle, and Dallas reported the highest year-over-year home value appreciation among the 35 largest U.S. metros. Portland home values rose 14 percent to a median value of $351,800. Both Seattle and Dallas home values rose 12 percent since last November.

Seattle reported the fastest rent appreciation of the 35 largest U.S. metros for the sixth month in a row, up almost 9 percent annually. Portland and Sacramento follow Seattle, with rents up about 7 percent.

Inventory remains an issue for home buyers across the country. There are 6 percent fewer homes to choose from than a year ago, with Boston, Indianapolis and Kansas City reporting the greatest drop. In Boston, there are 26 percent fewer homes to choose from than a year ago, and 21 percent fewer in Indianapolis and Kansas City.

Metropolitan
Area

Zillow
Home Value
Index (ZHVI)

Year-over-
Year ZHVI
Change

Zillow Rent
Index (ZRI)

Year-over-
Year ZRI
Change

Year-over-Year
Inventory
Change

United States

$    192,500

6.5%

$                 1,403

1.5%

-5.9%

New York, NY

$    400,500

6.0%

$                 2,389

0.5%

-10.4%

Los Angeles-Long Beach-Anaheim, CA

$    590,000

6.3%

$                 2,616

5.2%

-7.1%

Chicago, IL

$    203,400

5.0%

$                 1,637

-0.1%

-10.2%

Dallas-Fort Worth, TX

$    200,400

12.0%

$                 1,556

4.0%

-13.9%

Philadelphia, PA

$    213,800

4.1%

$                 1,574

1.0%

-12.3%

Houston, TX

$    176,000

7.0%

$                 1,562

-1.1%

0.6%

Washington, DC

$    378,000

2.9%

$                 2,123

0.6%

-18.8%

Miami-Fort Lauderdale, FL

$    245,200

8.8%

$                 1,879

3.1%

11.8%

Atlanta, GA

$    172,300

7.5%

$                 1,329

4.3%

-5.7%

Boston, MA

$    408,400

6.1%

$                 2,322

3.5%

-25.5%

San Francisco, CA

$    824,600

4.9%

$                 3,385

1.8%

-5.0%

Detroit, MI

$    134,400

9.4%

$                 1,169

3.2%

-17.2%

Riverside, CA

$    318,200

6.7%

$                 1,742

3.1%

-8.1%

Phoenix, AZ

$    228,900

6.9%

$                 1,301

4.1%

-1.4%

Seattle, WA

$    412,600

12.2%

$                 2,095

8.8%

-6.5%

Minneapolis-St Paul, MN

$    235,000

6.6%

$                 1,552

3.3%

-18.2%

San Diego, CA

$    526,500

6.1%

$                 2,436

5.2%

2.8%

St. Louis, MO

$    147,800

6.8%

$                 1,123

0.1%

-14.5%

Tampa, FL

$    177,200

11.2%

$                 1,336

3.2%

-10.7%

Baltimore, MD

$    256,600

3.6%

$                 1,729

0.7%

-16.0%

Denver, CO

$    352,800

9.7%

$                 2,006

2.8%

4.0%

Pittsburgh, PA

$    133,400

4.8%

$                 1,081

-1.4%

0.3%

Portland, OR

$    351,800

14.1%

$                 1,802

7.1%

-3.6%

Charlotte, NC

$    166,600

7.1%

$                 1,244

1.8%

-10.4%

Sacramento, CA

$    350,200

7.5%

$                 1,707

6.8%

-6.3%

San Antonio, TX

$    156,200

6.5%

$                 1,324

1.6%

12.8%

Orlando, FL

$    198,100

9.9%

$                 1,383

3.1%

-11.1%

Cincinnati, OH

$    147,800

5.6%

$                 1,243

1.5%

-16.3%

Cleveland, OH

$    130,600

5.2%

$                 1,145

1.6%

-10.8%

Kansas City, MO

$    151,900

5.9%

$                 1,241

3.8%

-20.5%

Las Vegas, NV

$    213,700

9.6%

$                 1,243

2.4%

26.0%

Columbus, OH

$    160,400

3.9%

$                 1,293

1.7%

-18.9%

Indianapolis, IN

$    133,600

1.5%

$                 1,188

0.3%

-20.7%

San Jose, CA

$    961,600

4.3%

$                 3,486

1.9%

-14.4%

Austin, TX

$    259,800

8.4%

$                 1,701

0.9%

11.9%

Zillow

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Zillow and Zestimate are registered trademarks of Zillow, Inc.

For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

All information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

OnlineEd® is a registered Trademark