The Consumer Financial Protection Bureau is asking a federal judge to approve of a $24 million penalty against Wells Fargo for participating in a kick-back scheme.
The arrangement between Wells Fargo and a now-defunct mortgage servicing company allegedly went on between 2009 and 2013, despite “multiple warnings of the illegal arrangements,” according to a civil complaint filed at a Baltimore District Court on Thursday by the CFPB.
The two companies, the complaint stated, exploited “a hot mortgage refinancing market and very low interest rates” to deceive customers who purchased “thousands of loans.”
Over 100 Wells Fargo loan officers in no less than 18 branches in Maryland and Virginia allegedly took part in the arrangement.
The mortgage servicing company, Genuine Title, is accused of offering Wells Fargo cash and marketing services in exchange for customer referrals. The CFPB said the practice is “deceptive” and in violation of the Real Estate Settlement Procedures Act (RESPA).
Maryland Attorney General Brian Frosh, who was listed as a party to the complaint, said that the “quid pro quo arrangement is illegal, and it’s unfair to other businesses that play by the rules.”
“Homeowners were steered toward this title company, not because they were the best or most affordable, but because they were providing kickbacks to loan officers who referred consumers to them,” he said.
Employees of both companies knew they were engaged in illegal behavior, but went about their business–in a rather casual manner.
In a move that left a glaring paper trail, one email sent by a Genuine Title employee to a printing and mailing company asked for “fake invoices,” the CFPB said.
A Wells Fargo branch manager also told loan officers that they could not use company finances to send letters at the center of the conspiracy, but “did not tell the loan officers to discontinue accepting Genuine Title’s assistance.” The officers, the complaint said, continued to use marketing services offered by Genuine Title and, in turn, provided the servicing company with Wells Fargo stationary used the duo’s illegal scheme.
The company lacked “an adequate system” need to root out RESPA violations, according to court documents.
JPMorgan was also listed as having violated RESPA in the same set-up involving Genuine Title. It only, allegedly, used the company’s illegal scheme in conjunction with 200 loans issued by three branches, the CFPB said, and was subsequently fined a mere $600,000–subject to judicial review.
If a judge agreed with the CFPB’s findings, the two banks will also pay consumers $11.1 million in damages.
A third “unnamed financial institution” was also briefly involved in the Genuine Title endeavor, but stopped participating after “its own thorough investigation,” the CFPB said. The loan officer involved, Todd Cohen, was subsequently fired by the unnamed bank. He had previously worked for Wells Fargo.
The CFPB is also seeking approval for a $30,000 fine for Cohen and his wife–the latter allegedly helped launder payments from Genuine Title.
