As reported in RISMedia and other outlets, a major mortgage lender, Prospect Mortgage along with two real estate brokerages have been ordered by the CFPB, Consumer Financial Protection Bureau to pay more than $3.5 million in penalties for operating an illegal kickback program for mortgage business referrals.The Real Estate Settlement Procedures Act (RESPA) prohibits real estate agents and brokerages from recommending settlement services, such as title insurance, appraisals, inspections, and loan origination, to consumers in exchange for payment from those service providers.
“Today’s action sends a clear message that it is illegal to make or accept payments for mortgage referrals,” said CFPB Director Richard Cordray in a statement. “We will hold both sides of these improper arrangements accountable for breaking the law, which skews the real estate market to the disadvantage of consumers and honest businesses.”Prospect Mortgage is required to pay $3.5 million in civil penalties. Keller Williams is required to pay $180,000, and RE/MAX is required to pay $50,000.This is shaking up the industry, and very prevalent in new home lending. Many mortgage lenders are happy as it levels the playing field. This is not the wild west anymore with lending. Everyone has to play by the rules.