The Consumer Financial Protection Bureau (CFPB) has ordered 1st Alliance Lending to pay a civil penalty of $83,000 for illegally splitting real estate settlement fees. The Connecticut mortgage company self-reported its violations to the CFPB, admitted liability, and provided information that has aided other enforcement investigations.
“These types of illegal payments can harm consumers by driving up the costs of mortgage settlements,” said CFPB director Richard Cordray. “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.”
1st Alliance in 2010 began using a hedge fund to finance its loans, sharing revenues and fees with the hedge fund's affiliates. The following year, 1st Alliance secured cheaper financing and ended the arrangement with the hedge fund and its affiliates but continued to split origination and loss-mitigation fees with them. The hedge-fund affiliates received payments from 83 1st Alliance loans made between August 2011 and April 2012. 1st Alliance told the CFPB that it believed it had violated the Real Estate Settlement Procedures Act by paying these unearned fees.