In ‘Warning’ to Mortgage Market, Government Slaps Two Big Banks With $35.7 Million in Penalties

Photo (cc) by woodleywonderworks

Wells Fargo and JPMorgan Chase have agreed to pay a combined $35.7 million settlement for their participation in an alleged mortgage kickback scheme with a now-defunct Maryland-based title company.

According to the Consumer Financial Protection Bureau, the banks referred thousands of consumers to Genuine Title for real estate loan closing services in exchange for cash, marketing materials and other consumer information meant to help the banks attract more customers.

CFPB director Richard Cordray said in a statement:

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.

The CFPB and the Maryland Attorney General’s Office ordered Wells Fargo to pay $24 million in civil penalties and $10.8 million in redress to consumers. JPMorgan Chase must pay a $600,000 penalty, plus $300,000 in redress, the CFPB said.

“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.”

Genuine Title closed its doors in April 2014.

The CFPB said several other loan officers at a third financial institution also participated in the mortgage kickback scheme, but unlike the two big banks, that institution dealt with the issue, and the CFPB was able to resolve its investigation without taking any enforcement action.

“While Wells Fargo and JP Morgan Chase did not identify or address the illegal conduct, that [third] institution self-identified the problematic practices and terminated the loan officers involved,” the CFPB said.

Wells Fargo spokesman Tom Goyda said the bank has cooperated with the CFPB and fired the employees involved, The Associated Press reports. A spokesman for Chase Mortgage Banking said the loan officers involved in the scheme are no longer with the bank.

What do you think about the CFPB’s actions against the two big banks? Share your thoughts below or on our Facebook page.

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