CFPB Orders Mortgage Company to Pay $13 Million for Borrower Steering

The Consumer Financial Protection Bureau has taken action against a mortgage company for steering borrowers into costlier mortgages, the agency announced Thursday.

The CFPB has proposed a consent order in its enforcement action of Utah-based Castle & Cooke that would order the company to pay $9 million in restitution and $4 million in civil penalties for alleged payment of illegal bonuses to loan originators.

According to the complaint filed by the CFPB, the company’s president, Matthew Pineda and senior vice president of capital markets, Buck Hawkins, violated loan origination compensation law by paying loan officers quarterly bonuses that were dependent upon the interest rates offered to borrowers.

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The rule, formerly enforced by the Federal Reserve and transferred to the CFPB under the Dodd-Frank Act, prohibits originators from being compensated based on loan terms, including interest rate. The CFPB alleges more than 1,100 quarterly bonuses were paid to more than 215 Castle & Cooke loan originators.

“Our action has put an end to illegal steering of consumers and has put more than $9 million back in their pockets,” said CFPB Director Richard Cordray. “This outcome embodies our mission—to root out bad practices from the marketplace and ensure consumers are being treated fairly.”

Castle & Cooke has agreed to the consent order, but admits no wrongdoing in the case.

“With today’s resolution we are pleased that we can now focus our undivided attention on our core mission: extending high quality loans and superior service to borrowers,” the company said in a statement. “The regulations are complex, but we are committed to legal and regulatory compliance in our lending.”

Castle & Cooke originated $1.3 billion in loans in 2012, according to the CFPB’s research. It has 45 branches and does business in 22 states.

Written by Elizabeth Ecker

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