The Consumer Financial Protection Bureau (CFPB) is taking action against real estate kickbacks, ordering one homebuilder to surrender funds received through illegal referral fees.
CFPB ordered Texas homebuilder Paul Taylor to pay the more than $100,000 he received in kickbacks for referring mortgage origination business to Benchmark Bank and to Willow Bend Mortgage Company.
Through partnerships with Benchmark Bank and Willow Bend Mortgage Company, Taylor created and jointly owned Stratford Mortgage Services, LC, which claimed to be a mortgage originator, according to the CFPB. Similarly, Taylor and Willow Bend created and jointly owned PTH Mortgage Company.
It was through each of these created entities that the CFPB noted as “shams designed to allow Taylor to receive the kickbacks.”
Taylor’s homebuilding company, Paul Taylor Homes, then referred mortgage origination business to the “sham entities,” according to the CFPB, however, the work was actually performed by Benchmark Bank and Willow Bend.
The kickbacks were then passed through the sham entities back to Taylor through profit distributions and as a payment through a “service agreement.”
The settlement resolves violations of the Real Estate Settlement Procedures Act (RESPA), which prohibits giving and receiving kickbacks for services involving federally related mortgages.
Under the settlement’s terms, Taylor has agreed to pay $118,194.20—the full amount of money he received since early 2010 from the kickbacks schemes, notes CFPB.
The CFPB became aware of Taylor’s conduct related to Benchmark Bank and Stratford through a referral from the Federal Deposit Insurance Corporation (FDIC).
FDIC separately fined Benchmark Bank for its role in the RESPA violations.
“Kickbacks harm consumers by hampering fair market competition and by unnecessarily increasing the costs of getting a mortgage,” said CFPB Director Richard Cordray. “The CFPB will continue to take action against schemes designed to let service providers profit through unscrupulous and illegal business practices.”
The Bureau is also prohibiting Taylor from engaging in future real estate settlement services, including mortgage origination.
“The Bureau will continue to enforce RESPA’s anti-kickback provisions to protect consumers and deter individuals from engaging in illegal activity,” said CFPB in a statement.
Written by Jason Oliva