Wells Fargo and JPMorgan Chase along with a former Wells Fargo employee and his wife are the subjects of consent orders filed by the Maryland Attorney General and the Consumer Financial Protection Bureau (CFPB). The orders ask for close to $37 million in civil penalties and consumer redress, by far the bulk of the moneys coming from Wells Fargo.
In announcing the orders, filed Thursday in federal court, CFPB said that they had taken action against the group because of an illegal marketing services kickback scheme they are alleged to have engaged in with Genuine Title. The Maryland-based title company, which went out of business in April 2014, had provided the banks' loan officers with cash and services in return for which the loan officers agreed to increase the title company's business by referring homebuyers to them for closing services. The services provided by Genuine were described by CFPB as including "purchasing, analyzing, and providing data on consumers and creating letters with the banks' logos that the company had printed, folded, stuffed into envelopes, and mailed."
CFPB said the marketing-services-kickback scheme violated the Real Estate Settlement Procedures Act (RESPA), which prohibits giving a "fee, kickback, or thing of value" in exchange for a referral of business related to a real-estate-settlement service.
Under terms of the consent agreement Wells Fargo will pay $24 million in civil penalties and JPMorgan Chase $600,000. In addition Wells Fargo will pay $10.8 million in redress to consumers whose loans were affected by the kick-back scheme and Chase will pay $300,000.
CFPB and the Maryland Attorney General also took action against former Todd Cohen who was employed by Wells Fargo as a loan officer from April 2009 until August 2010. The Bureau alleges the former employee not only received marketing materials but took substantial cash payments in exchange for referrals. In order to cover the source of the payment Elaine Oliphant (now Cohen) received the payments for her then-boyfriend. The proposed consent order requires Cohen and Oliphant Cohen to pay a civil penalty of $30,000, and bans Cohen from participation in the mortgage industry for two years.
The investigation, which received assistance from the Maryland Insurance Administration, identified more than 100 Wells Fargo loan officers in at least 18 branches, largely in Maryland and Virginia, who participated in the scheme and the Bureau alleges they referred thousands of loans to Genuine Title over its course. CFPB says that despite multiple warnings about the arrangements between its loan officers and the title company, including a federal lawsuit specifically alleging the relationship, the bank took no action and did not have an adequate system in place to identify the violations.
CFPB alleges that at least six Chase loan officers in three branches in Maryland, Virginia, and New York also participated in the Genuine Title kickbacks, referring almost 200 loans. The Bureau also filed an administrative consent order against Chase prohibiting future violations.
A third institution discovered it also had loan officers in their employ who were also participating in the scheme. They terminated the employees involved, self-identified to the Bureau, cooperated with the investigation, and self-initiated a remediation plan. The third institution was not identified and because of its response and cooperation were not party to the Bureau's action.
"Today we took action against two of the nation's largest banks, Wells Fargo and JPMorgan Chase, for illegal mortgage kickbacks," said CFPB Director Richard Cordray. "These banks allowed their loan officers to focus on their own illegal financial gain rather than on treating consumers fairly. Our action today to address these practices should serve as a warning for all those in the mortgage market."
"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," said Maryland Attorney General Brian Frosh. "This type of quid pro quo arrangement is illegal, and it's unfair to other businesses that play by the rules."
