Two days after announcing a proposed consent order with a mortgage company and its CEO to settle charges that the company paid bonuses and higher commissions to loan officers in violation of the Regulation Z loan originator compensation (LOC) rule, the CFPB announced a second settlement with another mortgage company involving alleged violations of the LOC rule. The consent order in the second settlement requires the mortgage company, which is no longer in business and in the process of dissolving, to pay a civil penalty of $228,000.
According to the consent order, the mortgage company paid monthly fees to marketing services entities (MSE) that were associated with each of its branch offices and set the fees based on the profitability of the associated branch. The owners of the MSEs, who included branch managers, and in some instances, other loan originators in a branch, drew the monthly fees as additional compensation. The consent order asserts that the fees paid to the MSEs by the mortgage company included income from loans originated by the owners of the MSEs that was based on the interest rates charged on the originated loans. As a result, the CFPB determined that the MSE owners received compensation based on the terms of the loans they originated in violation of the LOC rule.