Lenders, Real Estate Brokers To Pay More Than $5M For Alleged Kickback Scheme

The home buying process is complicated and expensive enough without mortgage servicers and real estate brokers tacking on illegal and costly fees. To that end, the Consumer Financial Protection Bureau has ordered Prospect Mortgage and three other companies to pay more than $5 million to settle allegations they participated in an illegal kickback scheme. 

The CFPB announced the enforcement action Tuesday, accusing Prospect Mortgage of paying illegal kickbacks to real estate brokers ReMax Gold Coast and Keller Williams Mid-Willamette, and lender Planet Home in exchange for referrals of customers purchasing homes.

According to the complaint [PDF] against Prospect Mortgage — which operates more than 100 branches across the country — from 2011 to 2016, the company used a variety of plays to pay kickbacks for referrals of mortgage business in violation of the Real Estate Settlement Procedures Act (RESPA).

To create the system, Prospect allegedly established marketing services agreements with companies — like ReMax Gold Coast and Keller Williams Mid-Willamette — which were framed as payments for advertising or promotion services. However, the payments were actually for business referrals.

The payments, which ranged from $25 to $500 per lead, would then be passed along to agents at the broker companies.

In all, the CFPB alleges that Mid-Willamette [PDF] received at least $145,000 from Prospect between 2012 and 2015. ReMax Gold Coast [PDF] received more than $500,000 from Prospect between 2014 and 2016, the complaint states.

The CFPB claims that Prospect paid brokers to require that potential homebuyers prequalify for a mortgage with Prospect, even if the customer had already been prequalified by another lender.

One method the company used, the complaint alleges, involved requiring brokers to engage in a practice of “writing in” Prospect into their real estate listing.

Additionally, the CFPB claims that Prospect and Planet Home Lending [PDF] had an agreement in which Planet would identify and persuade eligible consumers to refinance with Prospect for their Home Affordable Refinance Program (HARP) mortgages. Once a refinance was completed, the companies would allegedly split the proceeds of the sale.

For their part in the alleged schemes, the CPFB accused ReMax Gold Coast and Keller Williams Mid-Willamette of violating RESPA by exploiting consumers’ reliance on its recommendations for services by pointing them to Prospect.

As for Planet Home Lending, the CFPB claims the company violated RESPA, as well as the Fair Credit Reporting Act, by accepting fees from Prospect and unfairly marketing Prospect to consumers.

As part of Tuesday’s enforcement action, Prospect will pay $3.5 million to the CFPB’s Civil Penalty Fund, while ReMax Gold Coast must pay $50,000, Keller Williams Mid-Willamette must pay $145,000 in disgorgement and $35,000 in penalties. Finally, Planet Home will pay $265,000 in redress to harmed consumers.

Each of the companies must also refrain from paying for referrals or entering into agreements with service providers to endorse the use of their services.