Lender Turns Itself in to CFPB for RESPA Violations

A Connecticut-based mortgage lender will pay $83,000 in civil penalties after turning itself in to the Consumer Financial Protection Bureau for Real Estate Settlement Procedures Act violations.

The lender, 1st Alliance Lending, reported the violations—which involved splitting real estate settlement fees—to the Bureau along with admitting liability and providing information relating to conduct leading to other enforcement investigations.

“These types of illegal payments can harm consumers by driving up the costs of mortgage settlements,” said CFPB Director Richard Cordray in announcing the action taken against the lender. “The Bureau will use its enforcement authority to ensure that these types of practices are halted. We will, however, also continue to take into account the self-reporting and cooperation of companies in determining how to resolve such matters.”

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First Alliance focuses on providing loss-mitigation financing to distressed borrowers by obtaining troubled mortgages from services and then offering borrowers loss mitigation options.

The company began using a hedge fund to finance its loans in 2010 under an agreement through which the lender split revenues and fees—including origination and loss-mitigation fees—with hedge fund affiliates.

Those affiliates received payments from 83 First Alliance loans made between August 2011 and April 2012, according to the CFPB.

The company later reported in 2013 it believed it had violated RESPA for accepting unearned fees.

“1st Alliance Lending is committed to operating in a legal and highly ethical manner,” the company said in a statement. “Once we determined that the payments to our former service provider were in violation of RESPA, we self-reported these to the CFPB and cooperated fully with them as they analyzed the issue. This was an isolated situation and the entire matter was limited to the relationship between 1st Alliance and this warehouse funding provider.”

The CFPB said the self-reporting and cooperation of the company outlined with the Bureau’s Responsible Business Conduct bulletin published in June, were “taken into account in resolving this matter.”

Written by Elizabeth Ecker