Mortgage Third Parties Remain CFPB Target

On the heels of a lawsuit brought against a mortgage settlement agency by the Consumer Financial Protection Bureau this month the agency has shown a pattern of targeting third party affiliates, writes an attorney for K&L Gates in a notice this week. 

Lenders should be aware of the CFPB’s recent complaints around the Real Estate Settlement Procedures Act, attorney Holly Spencer Bunting writes, as they are taking issue with the relationships between lenders and the third parties with which they work. 

The latest complaint claims three principals for a law firm provided illegal referral fees to owners and mangers of real estate and mortgage brokerage companies through profit distributions made by title insurance affiliated business arrangements (AfBAs). 

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The third-party nature of these cases should make lenders aware of the relationships they maintain and how they do business with those entities. 

“In addition to reinforcing the CFPB’s focus on AfBAs and the importance of creating and operating bona fide AfBAs, the CFPB’s complaint raises new questions about how the CFPB is interpreting RESPA and seeking relief,” Bunting writes. 

There is additional gray area in the time frame for which the CFPB is enforcing RESPA, as one of the recent cases includes activities dating back to 2006. 

“Whether the CFPB intends to seek relief for AfBA activities in 2006 through 2010 and under what legal theory remains to be seen,” Bunting writes.

Further, the CFPB has scrutinized business agreements between lenders and AfBAs, and has found fault with the way they are written, which also leaves an area of uncertainty, she says. 

“Each of these issues has the potential to result in significant implications for AfBAs if the CFPB is successful in its apparent broad interpretations of the law and broad relief sought in the complaint,” Bunting says. “That makes this case one to watch for any persons or companies that own an interest in AfBAs under RESPA.”

Read the K&L Gates notice

Written by Elizabeth Ecker

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