BUILDER AND BANKS WERE FINED FOR VIOLATION OF RESPA

Builder was fined for receiving Kickbacks for referring mortgage origination

In today’s market, new build homes market are hot, are in demands and in many areas, e.g., North Texas, there are shortages of new build homes. Many Builders have required in the past and are still requiring now that the purchasers get pre-approved by one of their preferred lenders or banks. Though they cannot force a purchaser to get the loan from their preferred lender at the end, but many times they offer many good incentives that getting a lone from their preferred lender becomes very attractive. No matter what, per RESPA (Real Estate Settlement Procedures Act), builders cannot receive money from lenders for their referrals (No kickbacks). Similarly, lenders cannot pay to builders for their referrals.

Just few days ago, on May 17^th, 2013, The Consumer Financial Protection Bureau "CFPB" ordered a Texas homebuilder, Paul Taylor, to pay $118,194.20 that he had received in kickbacks for referring mortgage origination business to Benchmark Bank and to Willow Bend Mortgage Company in violation of Section 8(a) of the real estate settlement procedures act "RESPA". The CFPB also prohibited Paul Taylor from engaging in future real estate settlement services, including mortgage origination, for a period of five years from the date of this Order.

Benchmark Bank (“Bank”) is a bank chartered under Texas law, based in Plano, Texas, and insured by the Federal Deposit Insurance Corporation (“FDIC”). During the Relevant Time Period, the Bank originated home mortgages.

The Federal Deposit Insurance Corporation "FDIC" referred the incident to the CFPB. The FDIC imposed a civil money penalty on the Benchmark Bank after the FDIC “determined that the

Bank violated [RESPA] by creating and operating a company that was used by [the Bank] as a conduit for paying unlawful referral fees … for the referral of mortgage loan customers to the Bank.”

The CFPB settlement can be viewed by clicking here.