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Prospect Mortgage, LLC, a major mortgage lender, and two real estate brokerages have been ordered by the Consumer Financial Protection Bureau (CFPB) to pay more than $3.5 million in civil penalties and consumer compensation for participating in an “illegal kickback scheme” for mortgage business referrals.

Prospect, headquartered in Sherman Oaks, Calif., Corvallis, Ore.-based Keller Williams Mid-Willamette and Ventura, Calif.-based RE/MAX Gold Coast violated the Real Estate Settlement Procedures Act (RESPA), according to the CFPB, which prohibits real estate agents and brokerages from recommending settlement services, such as title insurance, appraisals, inspections, and loan origination, to consumers in exchange for payment from service providers.

“Today’s action sends a clear message that it is illegal to make or accept payments for mortgage referrals,” said CFPB Director Richard Cordray in a statement. “We will hold both sides of these improper arrangements accountable for breaking the law, which skews the real estate market to the disadvantage of consumers and honest businesses.”

One of the largest independent retail mortgage lenders in the U.S., Prospect Mortgage has had “improper arrangements” with more than 100 real estate brokerages from at least 2011 to 2016, including Keller Williams Mid-Willamette and RE/MAX Gold Coast, according to the CFPB, under the guise of desk-license agreements, lead agreements or marketing services agreements (MSAs). Prospect based payments to brokerages on number of referrals, and, in some cases, had brokerages require their clients to obtain a mortgage preapproval from Prospect, even if the client had a preapproval from another lender—a practice known as “writing in.” Keller Williams Mid-Willamette and RE/MAX Gold Coast accepted payments for referrals through these arrangements, according to the CFPB.

Prospect also established a similarly unlawful agreement with Meriden, Conn.-based Planet Home Lending in 2012, violating RESPA and the Fair Credit Reporting Act, for which the CFPB is also ordering payment, the Bureau stated. Prospect and Planet, which is not a lender, split the proceeds from the originations of refinance loans Planet persuaded consumers to obtain through Prospect, according to the CFPB, and Planet ordered “trigger leads” through credit reporting agencies that identified potential refinance customers for Prospect.

Prospect Mortgage is required to pay $3.5 million in civil penalties. Keller Williams Mid-Willamette is required to pay $145,000 in disgorgement and $35,000 in civil penalties. RE/MAX Gold Coast is required to pay $50,000 in civil penalties. Planet Home Lending is required to pay $265,000 in redress.

For more information, please visit www.consumerfinance.gov.

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