Eghbali had an arrangement with an escrow company that allowed him to manipulate the prices his customers would pay for escrow services

June 03, 2016

The Consumer Financial Protection Bureau (CFPB) has taken action against a former Wells Fargo employee for an illegal mortgage fee-shifting scheme.

According to the CFPB, David Eghbali referred a substantial number of loan closings to a single escrow company, which shifted its fees from some customers to others at Eghbali's request. Eghbali could then manipulate loan costs and ultimately increase the number of loans he closed, increasing his commissions.

"We have taken action against an individual loan officer for illegal mortgage fee-shifting," said CFPB Director Richard Cordray. "This should send a strong message that the law must be followed not only by large financial institutions, but also by the individuals who work for them."

David Eghbali served as a loan officer for the Wilshire Crescent Wells Fargo branch in Beverly Hills, California. The CFPB says that from at least November 2013 to February 2015, Eghbali had an arrangement with an escrow company, New Millennium Escrow, Inc., that allowed him to manipulate the prices his customers would pay for escrow services.

The CFPB's investigation found that, based on direction from Eghbali, New Millennium would reduce its fees for certain customers and make up for its loss by adding fees to loans for other customers. This scheme helped Eghbali generate business by allowing him to offer "no-cost" loans to price-conscious clients who might have gone to a competitor bank to find a cheaper loan. In exchange for these manipulations, the CFPB found that Eghbali referred nearly all his clients to New Millennium.

The CFPB says that Eghbali's fee-shifting scheme ultimately increased the number of loans he was able to close and, as a result, the commissions he was paid. Additionally, Eghbali received a top-producing loan officer award from Wells Fargo each year from 2011 to 2014. This recognition meant that he received a bonus on each loan he closed.

The CFPB found that Eghbali referred more than 100 loans to New Millennium through the fee-shifting scheme.

Under the terms of the CFPB's consent order, Eghbali is banned from working in the mortgage industry for one year and must pay an $85,000 civil penalty to the CFPB's Civil Penalty Fund.