A Connecticut lender has been fined
$83,000 by the Consumer Financial Protection Bureau (CFPB) for violating Real Estate
Settlement Procedures Act (RESPA) rules.
1st Alliance Lending, LLC apparently realized it had
illegally split real estate settlement fees and notified CFPB on its own of the
The East Hartford company buys
distressed mortgage loans from servicers and then attempts to refinance those
loans into new ones with lower principal balances through federally related
mortgage programs. 1st Alliance
initially obtained its funding from a hedge fund and split revenues and fees
with the hedge fund's affiliates. In
2011 1st Alliance ended the financing arrangement but continued to
split origination and loss-mitigation fees with the affiliates, a violation of
RESPA which bans a person from paying or
receiving a portion or split of a fee that has not been earned in connection
with a real estate settlement. Fees were shared for 83 loan originations
between August 2011 and April 2012.
In 2013, 1st Alliance
reported to the Bureau that it believed it had violated RESPA by paying these
unearned fees. CFPB said that 1st
Alliance cooperated with the Bureau's investigation and provided information
related to the conduct of others, facilitating other enforcement investigations. The lender's self-reporting and cooperation
were taken into account in determining that it would pay an $83,000 civil money
"These types of illegal payments
can harm consumers by driving up the costs of mortgage settlements," said CFPB
Director Richard Cordray. "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."
Update: the company released the following statement in addition to this press release after the CFPB announcement:
1st Alliance Lending is committed to operating in a legal and highly ethical manner. 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. We would like to point out that after 1st Alliance self-reported these inadvertent violations, the CFPB released Bulletin 2013-06, encouraging “responsible conduct” by financial institutions similar to the actions that 1st Alliance took in the situation. We are proud that we conducted ourselves in a manner that was well in advance of the CFPB's issuance of that guidance. We are pleased this matter has come to a conclusion. This agreement allows us to better focus our resources on helping consumers avoid the loss of their home by providing them with sustainable home ownership through principal reduction and affordability.