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Mortgage Lender Pays $83,000 Penalty for RESPA Violations

A Connecticut mortgage lender recently agreed to pay an $83,000 monetary penalty for violating the Real Estate Settlement Procedures Act (“RESPA”). The lender focused primarily on loss mitigation financing to distressed buyers. Originally, the lender was financed by a hedge fund and therefore, the lender and the hedge fund split the origination fees paid by the consumer. In 2011, the lender ended the arrangement with the hedge fund, but continued to split fees with the hedge fund for loans for the next year. Origination fees on a total of 83 loans were split.

In an unusual manner, the lender reported to the Consumer Financial Protection Bureau that it believed its arrangement was a violation of RESPA for the payment of unearned fees. The lender fully cooperated with CalBRE, which ultimately found in violation of RESPA. The lender paid a settlement of $83,000, which constituted $1,000 per violation.

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