Mortgage Company Sued for Giving Bonuses to Employees who Steered Homeowners to Bad Deals
The Consumer Financial Protection Bureau (CFPB) has sued a billion-dollar mortgage company for rewarding its employees when they convinced homeowners to accept bad deals.
Utah-based Castle & Cooke Mortgage was accused in federal court of paying out $4 million in bonuses to loan officers for steering consumers into unfavorable mortgages.
The litigation represents the first time that CFPB has gone after a financial institution for this kind of business practice, which was common before the financial crisis last decade.
Daniel Wagner at The Center for Public Integrity wrote that Castle & Cooke violated a federal prohibition on paying loan officers more when they sell loans with higher interest rates and fees.
“Before the ban … the company paid employees kickbacks for pushing higher-rate mortgages – ‘the higher the interest rates, the higher the loan officers’ commissions,’” Wagner wrote.
Then, after the ban went into effect, the company figured out a way around it: “They lumped the incentives into quarterly bonuses – ‘the higher the interest rates of the loans closed by a loan officer in the quarter, the higher the loan officer’s quarterly bonus,’” according to the complaint.
To Learn More:
Mortgage Lender Owned by Dole Foods Magnate Accused by CFPB of Abusive Practices (by Daniel Wagner, Center for Public Integrity)
Consumer Watchdog Finally Flexes Its Muscles (by Jonny Bonner, Courthouse News Service)
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