Mortgage Lender Accused of Paying Illegal Bonuses for Costlier Loans

July 23, 2013
Los Angeles Times 
mortgage lending news

The Consumer Financial Protection Bureau has filed suit against Castle & Cooke Mortgage, which it says paid illegal bonuses to employees who steered home buyers toward higher-cost financing. The case marks the first time a company has been targeted under new federal loan-origination compensation rules implemented in the wake of the financial crisis triggered by a wave of bad home loans. The bureau sued in federal court in Utah, where Castle & Cooke is based, accusing two of its top executives of running a quarterly bonus program that paid $6,100 to $8,700 to loan officers who talked consumers into taking out more expensive mortgages. It estimated that tens of thousands of consumers may have been affected since April 2011, when rules banning such compensation took effect. "Consumers should be able to get a mortgage without worrying about how the financial incentives of their loan officers may cause them to pay higher rates than they actually qualify for," said CFPB director Richard Cordray.
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