CFPB Files Complaint Against Mortgage Company for LO Comp Violation

The Consumer Financial Protection Bureau is cracking down on steering among mortgage companies in its latest allegations, which cite a violation of loan originator compensation rules.

The bureau today filed a complaint in federal district court against Castle & Cooke Mortgage LLC, a Utah-based mortgage lender, alleging the company and two of its officers illegally provided bonuses to loan originators who steered consumers into mortgages with higher interest rates.

“Today we are taking action against the type of practices that precipitated the financial crisis,” said CFPB Director Richard Cordray. “Consumers should be able to get a mortgage without worrying about how the financial incentives of their loan officers may cause them to pay higher rates than they actually qualify for.”

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Castle & Cooke originated $1.3 billion in mortgages last year, doing business in 22 states through 45 branches, according to the CFPB’s communications on the filing, which alleges company president Matthew Pineda and senior vice president of capital markets, Buck Hawkins violated the Federal Reserve’s loan originator compensation rule as of April 2011, which banned compensation based on loan terms.

The CFPB alleges that Castle & Cooke, through the actions taken by its president, Matthew A. Pineda, and senior vice-president of capital markets, Buck L. Hawkins, violated the Federal Reserve Board’s Loan Originator Compensation Rule that had a mandatory compliance date of April 6, 2011. That rule banned compensation based on loan terms such as the interest rate of the loan.

According to the CFPB’s investigation, the company paid more than 1,100 illegal bonuses to originators who were compensated based on terms of the loans they originated.

The bureau seeks to obtain civil penalties, which can be sought up to $5,000 per bonus violation, up to $25,000 for reckless violations, and up to $1,000,000 for knowing violations.

Written by Elizabeth Ecker

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