The federal consumer watchdog agency ordered a Texas homebuilder to return more than $100,000 in illegal fees he received for referring homebuyers to false mortgage companies for loans.
The Consumer Financial Protection Bureau says the builder, Paul Taylor, created two sham companies as a partnership with two real mortgage companies to funnel the referral fees.
The false companies that claimed to be mortgage originators were Stratford Mortgage Servicers and PTH Mortgage Company. The actual loan originators were Benchmark Bank and Willow Bend Mortgage Company.
Paul's Dallas-based homebuilding company, Paul Taylor Homes, would refer homebuyers to the two fake companies, but the work was actually done by Benchmark and Bend. Taylor's fake companies would then receive the referral fees through the partnership through profit distributions and as payments through "service agreement," the CFPB says.
Federal law prohibits homebuilders from receiving kickbacks to refer borrowers to loan originators.
"Kickbacks harm consumers by hampering fair market competition and by unnecessarily increasing the costs of getting a mortgage," said CFPB Director Richard Cordray. "The CFPB will continue to take action against schemes designed to let service providers profit through unscrupulous and illegal business practices."
In the settlement with the CFPB, Taylor has agreed to pay back the more than $118,000 he received since the scheme started in early 2010. This settlement resolves violations of the Real Estate Settlement Procedures Act. Taylor and the companies involved did not admit or deny the CFPB's claims, according to the settlement.
Separately, the Federal Deposit Insurance Corp. fined Benchmark Bank for its role in the RESPA violations.