If your small business has been operating under the “it won’t happen to me” assumption in regards to a CFPB audit, think again. The CFPB has repeatedly made it clear that they intend to audit everyone in the mortgage industry, regardless of size. They started with the bigger banks and mortgage lending institutions, but they’re starting to flex their muscle with audits of small businesses as well. Last month, the CFPB took action with a settlement that fined a small Texas builder over $118,000 for illegal kickback allegations in return for referrals to a mortgage lender he held interest in.
The Texas homebuilder received the money for mortgage origination referrals, a form of kickback which has been prohibited since the 1970s by Section 8 of RESPA. Specifically, RESPA prohibits “giving or accepting a fee, kickback, or anything of value in exchange for referrals…involving a federally related mortgage loan.” The builder had referred the client to seek mortgage loans from a joint venture that turned out to be a “sham operated entity” whose sole purpose was to provide mortgage loans for the builder’s clients at a higher-than-normal rate. The mortgage service provider then provided the kickback to the builder. Over the course of the relevant time period, this happened with over 30 loans.
Read the whole consent order on the CFPB website here.
The punishment for RESPA violations is a cautionary tale in and of itself, but it is hardly unique. A cursory internet search returns several cases of crackdowns on kickback violations. The really significant implication of this recent settlement by the CFPB is that, as promised, they have started looking at even a very small scale for issues that could possibly exploit the consumer. The days of counting on the small size of a business to provide anonymity are long gone.
If your company is struggling with compliance issues that the CFPB would perceive as harmful to the consumer, now is the time to consider solutions like an assessment, education, or a compliance management system. Whether you are uncertain about your HMDA, RESPA, or Anti-Money Laundering preparedness, or your ability to demonstrate it, resources such as OnlineEd.com can help.
Joseph is a graduate of Oregon State University. When he isn’t at work, he stays busy with music and recreational sports.