(Consumer Financial Protection Bureau – Washington, D.C.) Today, the Consumer Financial Protection Bureau ordered a Connecticut mortgage lender, 1st Alliance Lending, LLC (First Alliance), to pay an $83,000 civil money penalty for violating federal law by illegally splitting real estate settlement fees. First Alliance self-reported these violations to the Bureau, admitted liability, and provided information related to the conduct of other actors that has facilitated other enforcement investigations.
“These types of illegal payments can harm consumers by driving up the costs of mortgage settlements,” said CFPB Director Richard Cordray. “The Bureau will use its enforcement authority to ensure that these types of practices are halted. We will, however, also continue to take into account the self-reporting and cooperation of companies in determining how to resolve such matters.”
First Alliance is a mortgage lender in East Hartford, Conn. that focuses primarily on providing loss-mitigation financing to distressed borrowers. First Alliance obtains troubled mortgages from mortgage servicers, and reaches out to consumers to offer them new loans with reduced principal amounts under federally related mortgage programs.
First Alliance started using a hedge fund to finance its loans in 2010. Under this arrangement, First Alliance split revenues and fees with affiliates of the hedge fund. In 2011, First Alliance secured less costly financing and ended its arrangement with the hedge fund and its affiliates. Although the hedge fund and its affiliates no longer financed First Alliance’s mortgages, First Alliance continued to split origination and loss-mitigation fees with them. The hedge-fund affiliates received payments from 83 First Alliance loans made between August 2011 and April 2012.
In 2013, First Alliance reported to the Bureau that it believed it had violated the Real Estate Settlement Procedures Act (RESPA) by paying these unearned fees. RESPA bans a person from paying or receiving a portion or split of a fee that has not been earned in connection with a real estate settlement. First Alliance cooperated with the Bureau’s investigation, and the Bureau concluded that First Alliance’s payments to the hedge fund and its affiliates had violated RESPA. First Alliance’s self-reporting and cooperation, consistent with the Bureau’s Responsible Business Conduct bulletin published on June 25, 2013, were taken into account in resolving this matter.
Under the terms of today’s consent order, First Alliance is required to pay a civil money penalty of $83,000 to the Bureau and agrees not to violate RESPA in the future. The Bureau will continue to enforce RESPA’s provisions to protect consumers and to deter unlawful activity.
A copy of the Bureau’s consent order is available here: http://files.consumerfinance.gov/f/201402_cfpb_consent-order_first-alliance.pdf
For more information about OnlineEd and their pre-license and continuing education for real estate and mortgage brokers, please visit www.OnlineEd.com. For more information about mortgage-specific products for compliance training, tracking, and management, please visit https://www.onlineed.com/inlineed.php or contact Joseph Mikkelson at 1.866.519.9597.
This article was published on February 25, 2014. All information contained in this posting is deemed correct and current as of this date, but is not guaranteed by the author. Due to the fluid nature of the subject matter, regulations, requirements, 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.
Jeff Sorg, an Oregon licensed Principal Broker, is a co-founder of OnlineEd®, a Web-based vocational school founded in 1997 where he also serves as Corporate Secretary, Chief Operating Officer, and School Director. Sorg holds vocational instructor licenses for real estate education in Oregon, Washington, California, Flordia, and Nevada and has authored numerous pre-licensing and continuing education courses in those states. Sorg holds the International Distance Education Certification Center’s CDEi Designation for distance education, originally awarded in 2008.
OnlineEd® provides real estate, mortgage broker, insurance, and contractor pre-license, post-license, continuing education, career enhancement, and professional development and designation courses over the Internet.