CFPB Orders Payout for RESPA Violations

CFPB Orders Payout for RESPA Violations

The Consumer Financial Protection Bureau (CFPB) announced in a press release Monday that it has ordered1st Alliance Lending, LLC (First Alliance) to pay an $83,000 civil money penalty for violating federal law.

The company illegally split real estate settlement fees, leading to the CFPB ordered payout.

First Reliance self-reported the violations to the Bureau, admitted liability, and provided information related to other actors that helped facilitate other investigations.

“These types of illegal payments can harm consumers by driving up the costs of mortgage settlements,” said Richard Cordray, CFPB Director, in the release. “The Bureau will use its enforcement authority to ensure that these types of practices are halted. We will, however, also continue to take into account the self-reporting and cooperation of companies in determining how to resolve such matters.”

First Alliance is a mortgage lender in East Hartford, Connecticut, that provides loss-mitigation financing to distressed borrowers. The company obtains troubled mortgages from services, and reaches out to consumers to offer new loans at reduced principal amounts under federally related mortgage programs.

Trouble began when First Alliance began using a hedge fund to finance its loans in 2010.

The release notes, “Under this arrangement, First Alliance split revenues and fees with affiliates of the hedge fund. In 2011, First Alliance secured less costly financing and ended its arrangement with the hedge fund and its affiliates.”

The report continues, “Although the hedge fund and its affiliates no longer financed First Alliance’s mortgages, First Alliance continued to split origination and loss-mitigation fees with them. The hedge-fund affiliates received payments from 83 First Alliance loans made between August 2011 and April 2012.”

Under the Real Estate Settlement Procedures Act (RESPA), a person is banned from paying or receiving a portion or split of a fee that has not been earned in connection with a real estate settlement. First Alliance reported to the bureau the violations in 2013, and the Bureau found that First Alliance had indeed violated RESPA.

The CFPB notes, “First Alliance’s self-reporting and cooperation, consistent with the Bureau’s Responsible Business Conduct bulletin published on June 25, 2013, were taken into account in resolving this matter.”


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