Wells Fargo and JPMorgan Chase along with a former Wells
Fargo employee and his wife are the subjects of consent orders filed by the
Maryland Attorney General and the Consumer Financial Protection Bureau (CFPB). The orders ask for close to $37 million in
civil penalties and consumer redress, by far the bulk of the moneys coming from
Wells Fargo.
In announcing the orders, filed Thursday in federal court, CFPB
said that they had taken action against the group because of an illegal marketing
services kickback scheme they are alleged to have engaged in with Genuine
Title. The Maryland-based title company,
which went out of business in April 2014, had provided the banks' loan officers
with cash and services in return for which the loan officers agreed to increase
the title company's business by referring homebuyers to them for closing
services. The services provided by
Genuine were described by CFPB as including "purchasing,
analyzing, and providing data on consumers and creating letters with the banks'
logos that the company had printed, folded, stuffed into envelopes, and mailed."
CFPB said the marketing-services-kickback
scheme violated the Real Estate Settlement Procedures Act (RESPA), which
prohibits giving a "fee, kickback, or thing of value" in exchange for a
referral of business related to a real-estate-settlement service.
Under terms of the consent agreement Wells Fargo will pay
$24 million in civil penalties and JPMorgan Chase $600,000. In addition Wells Fargo will pay $10.8
million in redress to consumers whose loans were affected by the kick-back
scheme and Chase will pay $300,000.
CFPB and the Maryland Attorney General also took action against former Todd
Cohen who was employed by Wells Fargo as a loan officer from April 2009 until
August 2010. The Bureau alleges the former
employee not only received marketing materials but took substantial cash
payments in exchange for referrals. In
order to cover the source of the payment Elaine Oliphant (now Cohen) received
the payments for her then-boyfriend. The proposed consent order requires Cohen and Oliphant
Cohen to pay a civil penalty of $30,000, and bans Cohen from participation in
the mortgage industry for two years.
The investigation, which received assistance
from the Maryland Insurance Administration, identified more than 100 Wells
Fargo loan officers in at least 18 branches, largely in Maryland and Virginia, who
participated in the scheme and the Bureau alleges they referred thousands of
loans to Genuine Title over its course. CFPB says that despite multiple warnings about
the arrangements between its loan officers and the title company, including a
federal lawsuit specifically alleging the relationship, the bank took no action
and did not have an adequate system in place to identify the violations.
CFPB alleges that at least six Chase loan
officers in three branches in Maryland, Virginia, and New York also
participated in the Genuine Title kickbacks, referring almost 200 loans. The Bureau also filed an administrative
consent order against Chase prohibiting future violations.
A third institution discovered it also had
loan officers in their employ who were also participating in the scheme. They terminated the employees involved, self-identified
to the Bureau, cooperated with the investigation, and self-initiated a
remediation plan. The third institution
was not identified and because of its response and cooperation were not party
to the Bureau's action.
"Today we took action against two of the
nation's largest banks, Wells Fargo and JPMorgan Chase, for illegal mortgage
kickbacks," said CFPB Director Richard Cordray. "These banks allowed their loan
officers to focus on their own illegal financial gain rather than on treating
consumers fairly. Our action today to address these practices should serve as a
warning for all those in the mortgage market."
"Homeowners were steered toward this title
company, not because they were the best or most affordable, but because they
were providing kickbacks to loan officers who referred consumers to them," said
Maryland Attorney General Brian Frosh. "This type of quid pro quo arrangement
is illegal, and it's unfair to other businesses that play by the rules."