A complaint filed this week in federal court claims that two of the nation's largest banks were involved in an illegal kickback scheme with a now-defunct title company.
In a joint complaint with the Maryland Attorney General, the Consumer Financial Protection Bureau (CFPB) charges that loan officers at Wells Fargo and JPMorgan Chase were given cash, marketing material and consumer information in exchange for referring mortgage customers to Genuine Title for closing services.
The proposed consent order would fine Wells Fargo $24 million and JPMorgan Chase $600,000 in civil penalties, and requires $11.1 million in redress to consumers whose loans were involved in the scheme. Former Wells Fargo employee Todd Cohen and his wife Elaine Oliphant Cohen would also pay $30,000 for their involvement.
Maryland-based Genuine Title offered real-estate-closing services from 2005 to 2014 when it finally went out of business. Working with several institutions, the company provided services that included purchasing, analyzing, and providing data on consumers, and creating letters with the banks' logos that the company also printed and mailed.
Loan officers then referred homebuyers to the company for closing services.
This type of practice is prohibited under the Real Estate Settlement Procedures Act (RESPA).
A CFPB investigation found more than 100 Wells Fargo loan officers across nearly 20 branches who participated in the scheme. In its complaint, the CFPB alleges that Wells Fargo received multiple warnings of illegal arrangements, including a federal lawsuit, but failed to take action to stop the practice.
Cohen was an employee of the bank from April 2009 through August 2010 and received cash payments in exchange for referrals. Genuine Title paid Cohen's wife tens of thousands of dollars in payments for business he referred. On top of the civil penalty, Cohen would be banned from the mortgage industry for two years.
At least six Chase loan officers in three different branches in Maryland, Virginia and New York were also involved in the scheme. The complaint alleges that these officers referred business to Genuine Title on almost 200 loans, as opposed to Wells Fargo, which referred thousands of homebuyers.
Both banks did not have the proper system in place to catch these violations, said the complaint.
According to a release from the Bureau, both banks identified the problematic practices and terminated the involved loan officers. Both cooperated with the investigation and initiated a remediation plan.
A copy of the complaint can be found here.