Two of the largest financial institutions in the country are having their feet held to the fire over blatant violations of the Real Estate Settlement Procedure Act, according to a complaint filed in federal court last week by the Consumer Financial Protection Bureau and Maryland Attorney General.
The complaint involves employees of Wells Fargo and JPMorgan Chase who participated in a kickback scheme with a now-defunct Maryland title company Genuine Title in which loan officers received cash, marketing materials and customer information in exchange for referrals.
"This type of quid pro quo arrangement is illegal, and it’s unfair to other businesses that play by the rules," said Maryland Attorney General Brian Frosh.
More than 100 loan officers from at least 18 Wells Fargo branches allegedly participated in the scheme as did at least six loan officers from three Chase bank branches, according to the complaint. Consequently, Wells Fargo is facing $24 million in civil penalties and $10.8 million in redress while JPMorgan Chase faces $600,000 in civil penalties and $300,000 in redress.
The details of the complaint reveal blatant RESPA violations going back to 2009 and involving thousands of home loans and tens of thousands of dollars. Genuine Title went so far as to foot the bill for direct-mail campaigns and branded marketing materials. They even paid some loan officers cold, hard cash.
One former Wells Fargo loan officer was singled out by name in the complaint for accepting cash payments. His then-girl friend, now-wife was also identified in the complaint for taking the payments on behalf of the loan officer to disguise the arrangement. They will pay a $30,000 penalty.
The huge dollar figures and overt rule-breaking are not what makes this case special, though. What makes it special is the offenders got caught and will face their day in court. For those of us in the trenches – the so-called "rule abiders" of the title industry, fighting the good fight independently – we are aware that this kind of thing occurs all too frequently and we can only shake our heads.
The truth is most consumers still don't know they can select their own settlement service provider. Nine times out of ten, the homebuyers we encounter say they just went along with whatever their agent or lender recommended because it was convenient. They have no idea about the potential for a conflict of interest and how they could be saving hundreds of dollars by choosing their own independent title company.
The only way to combat this sad fact of the home buying experience, is to get the message out to consumers as well as the businesses who seek to take advantage of them. We fully support the CFPB and other government regulators who shine a light on these anti-consumer and, often, illegal business pursuits.