U.S. Agency Targets Texas Builder in Mortgage Kickbacks Case

U.S. Agency Targets Texas Builder in Mortgage Kickbacks CaseIn taking action against a Texas builder, the U.S. Consumer Financial Protection Bureau is demonstrating its new authority over a federal law that aims to rein in any fees or kickbacks from referring real estate services.
Wall Street reform enacted three years ago gives the CFPB the power to make make sure that any deals between builders and mortgage lenders adhere to the Real Estate Settlement Procedures Act, or RESPA.
RESPA requires that consumers receive disclosures at various times in the transaction and outlaws kickbacks that increase the cost of settlement services.
Industry professionals mostly say these types of arrangements can provide conveniences to potential homebuyers. The CFPB says it unfairly increases the cost of a mortgage.
The U.S. agency Friday said it ordered Texas homebuilder Paul Taylor to surrender more than $100,000 he received in kickbacks for referring mortgage origination business to Benchmark Bank and to Willow Bend Mortgage Company.
The Bureau is also prohibiting Taylor from engaging in future real estate settlement services, including mortgage origination.
“Kickbacks harm consumers by hampering fair market competition and by unnecessarily increasing the costs of getting a mortgage,” said CFPB Director Richard Cordray. “The CFPB will continue to take action against schemes designed to let service providers profit through unscrupulous and illegal business practices.”
The CFPB said the arrangement worked like this:
Paul Taylor received illegal referral fees through partnerships with Benchmark Bank and Willow Bend Mortgage Company.
Taylor and the bank created and jointly owned Stratford Mortgage Services, LC, which claimed to be a mortgage originator. Similarly, Taylor and Willow Bend created and jointly owned PTH Mortgage Company. In reality both entities were shams designed to allow Taylor to receive the kickbacks.
His homebuilding company, Paul Taylor Homes, then referred mortgage origination business to the sham entities. However, the work was actually performed by the Bank and Willow Bend.
The agency said the kickbacks were passed through the sham entities back to Taylor through profit distributions and as a payment through a “service agreement.”
See the CFPB’s consent order against Taylor.
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