The Consumer Financial Protection Bureau (CFPB) has ordered a California mortgage bank, Guarantee Mortgage Corporation, to pay a civil penalty of $228,000 for paying its branch managers based, in part, on the interest rates of the loans they closed.
The Loan Originator Compensation Rule, which the CFPB has enforced since July 21, 2011, protects consumers from being steered into costlier home mortgage loans by prohibiting loan originators from receiving compensation based on the interest rates of the loans they close.
Guarantee Mortgage Corp., which is no longer in business, was a mortgage banking firm that operated 10 branches in the San Francisco Bay Area of California. The CFPB's investigation found that Guarantee violated the Loan Originator Compensation Rule by paying loan originators in part based on the interest rates charged on loans they had originated.
The compensation was funded by payments Guarantee made to marketing services entities owned in part by the company's branch managers and other Guarantee loan originators; the originator-owners drew a portion of those fees as compensation. As a result, the CFPB says that branch managers received compensation based on the interest rates of the home mortgage loans they originated in violation of the Loan Originator Compensation Rule during that period.
The CFPB's consent order requires Guarantee Mortgage, which is in the process of dissolving, to pay $228,000 to the Bureau's Civil Penalty Fund.
A copy of the full consent order is available here.