Prospect Mortgage, a major Sherman Oaks-based lender with nationwide branches, will pay a $3.5 million fine to settle charges that it operated an illegal kickback scheme, the Los Angeles Times reported.
The federal charges, brought by the Consumer Financial Protection Bureau, alleged that Prospect used fraudulent marketing agreements to conceal payments to brokers for referrals of clients.
The bogus marketing agreements adjusted payments according to the number of referrals made by individual brokers. Prospect is also alleged to have paid brokers to require pre-approval by Prospect for all customers, even those who were already qualified elsewhere, the Times said.
Kickbacks are illegal, because consumers often rely on real estate agents to recommend lenders, and the quid-pro-quo might inflate prices and limit competition.
The ruling sends a “clear message that it is illegal to make or accept payments for mortgage referrals,” CFPB Director Richard Cordray said in a statement. “We will hold both sides of these improper arrangements accountable for breaking the law, which skews the real estate market to the disadvantage of consumers and honest businesses.”
Prospect did not admit any wrongdoing and said in a statement that the settlement covers alleged practices “initiated under the prior management team” and “closes an important chapter in the company’s history.” [LA Times] — Gabrielle Paluch