The U.S. financial regulator fined JPMorgan Chase and Wells Fargo $36 million over a mortgage kickback scheme involving some of their employees, a report said.
The Consumer Financial Protection Bureau (CFPB) charged employees of the banks with entering into an illegal arrangement with a now-defunct Maryland mortgage title company, Genuine Title, under which the company gave cash, marketing materials and consumer information in exchange for bank business, The Hill said.
“These banks allowed their loan officers to focus on their own illegal financial gain rather than on treating consumers fairly. Our action today to address these practices should serve as a warning for all those in the mortgage market, ” said CFPB Director Richard Cordray, according to the report.
Genuine Title offered real-estate-closing services from 2005 until it went out of business in April 2014, the Financial Times said.
Under the terms of the settlement, Wells Fargo will pay $24 million in civil penalties, and JPMorgan is to pay another $600, 000. The banks will also provide $11.1 million in redress to impacted consumers, and a bank employee and his wife will pay a $30, 000 penalty, The Hill said.
JPMorgan said that “We are fully committed to ensuring that our mortgage bankers comply with all legal and regulatory requirements. These former employees clearly violated our policies, procedures and training”, according to the Financial Times.
Wells Fargo said in a statement that it “does not tolerate improper activities or failure to comply with rules, regulations or company policies”, adding that it has “taken strong corrective action, including terminating team members who were involved and enhancing our procedures to provide greater oversight and monitoring of both the process and our team members”, the Times said.
The CFPB determined in its investigation that more than 100 Wells Fargo loan officers in Maryland and Virginia entered into the illegal arrangement, and another six loan officers from JPMorgan did as well. According to the agency, a third financial institution also had employees participating in the scheme, but that bank was not identified as it self-identified the issue, reported it to regulators and fired the employees involved, the report said.
The CFPB fined one Wells Fargo employee for receiving cash payments as part of a business referral arrangement. The regulator said “tens of thousands of dollars” were given to the loan officer but were routed through his wife to disguise the nature of the compensation, according to The Hill.
Under the Real Estate Settlement Procedures Act, businesses are barred from referring real estate settlement services to specific companies in exchange for a “fee, kickback, or thing of value”, the website said.