CFPB Fines Lender for Fee Splitting

A Connecticut lender has been finedrn$83,000 by the Consumer Financial Protection Bureau (CFPB) for violating Real EstaternSettlement Procedures Act (RESPA) rules. rn1^st Alliance Lending, LLC apparently realized it hadrnillegally split real estate settlement fees and notified CFPB on its own of therninfraction.</p

The East Hartford company buysrndistressed mortgage loans from servicers and then attempts to refinance thosernloans into new ones with lower principal balances through federally relatedrnmortgage programs.  1^st Alliancerninitially obtained its funding from a hedge fund and split revenues and feesrnwith the hedge fund’s affiliates.  Inrn2011 1^st Alliance ended the financing arrangement but continued tornsplit origination and loss-mitigation fees with the affiliates, a violation ofrnRESPA which  bans a person from paying orrnreceiving a portion or split of a fee that has not been earned in connectionrnwith a real estate settlement.   Fees were shared for 83 loan originationsrnbetween August 2011 and April 2012.  </p

In 2013, 1^st Alliancernreported to the Bureau that it believed it had violated RESPA by paying thesernunearned fees.    CFPB said that 1^{st</supAlliance cooperated with the Bureau's investigation and provided informationrnrelated to the conduct of others, facilitating other enforcement investigations.  The lender's self-reporting and cooperationrnwere taken into account in determining that it would pay an $83,000 civil moneyrnpenalty</p}

“These types of illegal paymentsrncan harm consumers by driving up the costs of mortgage settlements,” said CFPBrnDirector Richard Cordray. “The Bureau will use its enforcement authority tornensure that these types of practices are halted. We will, however, alsorncontinue to take into account the self-reporting and cooperation of companiesrnin determining how to resolve such matters.”</p

Update: the company released the following statement in addition to this press release after the CFPB announcement:</p

1st Alliance Lending is committed to operating in a legal and highly ethical manner. Once we determined that the payments to our former service provider were in violation of RESPA, we self-reported these to the CFPB and cooperated fully with them as they analyzed the issue. This was an isolated situation and the entire matter was limited to the relationship between 1st Alliance and this warehouse funding provider. We would like to point out that after 1st Alliance self-reported these inadvertent violations, the CFPB released Bulletin 2013-06, encouraging “responsible conduct” by financial institutions similar to the actions that 1st Alliance took in the situation. We are proud that we conducted ourselves in a manner that was well in advance of the CFPB’s issuance of that guidance. We are pleased this matter has come to a conclusion. This agreement allows us to better focus our resources on helping consumers avoid the loss of their home by providing them with sustainable home ownership through principal reduction and affordability.

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