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The Consumer Financial Protection Bureau (CFPB) and the Maryland Attorney General have taken action against the participants in a mortgage-kickback scheme. In a complaint filed in federal court, the CFPB and Maryland allege that the Maryland-based title company’s executives and the named loan officers traded cash and marketing services in exchange for mortgage referrals. Under proposed consent orders, if entered by the court, five of the six individual defendants would be banned from the mortgage industry and required to pay a total of $662,500 in redress and penalties. The action will proceed against the remaining defendant. The announcement follows enforcement actions in January against Wells Fargo and JPMorgan Chase for their role in the scheme.
“Paying kickbacks for mortgage referrals is illegal, and it has been illegal for decades,” said CFPB Director Richard Cordray. “Secret and unlawful payments keep consumers in the dark and put honest businesses at a disadvantage, and the Consumer Bureau will continue to take action against them.”
Genuine Title was a Maryland-based title company that offered real estate closing services from 2005 until it went out of business in April 2014. The CFPB and Maryland Attorney General’s complaint names Genuine Title LLC; Jay Zukerberg; Brandon Glickstein; Gary Klopp; Adam Mandelberg; William Peterson; Angela Pobletts; and a number of limited-liability companies controlled by certain defendants. Zukerberg was the founder and sole owner of Genuine Title, and Glickstein was the company’s director of marketing. Klopp, Mandelberg, and Pobletts were loan officers working in the greater Baltimore area. Peterson was a loan officer and the president of a Maryland-based mortgage brokerage.
The CFPB and Maryland allege that Zukerberg and Glickstein developed and operated schemes to give loan officers marketing services and cash payments in exchange for referrals of mortgage business. The kickback schemes violated the Real Estate Settlement Procedures Act (RESPA), which prohibits giving a “fee, kickback, or thing of value” in exchange for a referral of business related to a real estate settlement service. Specifically, the Bureau and Maryland allege that the defendants:
►Exchanged valuable marketing services for referrals: Genuine Title offered services, including purchasing, analyzing, and providing data on consumers, and creating letters with the loan officers’ contact information that the company printed, folded, stuffed into envelopes, and mailed. In return, the loan officers would refer homebuyers to the company for closing services. This scheme was especially profitable for the loan officers, who generally are paid by commission, because the marketing services increased the amount of business they generated.
►Funneled illegal cash kickbacks through a network of companies: The four individual loan officers named in today’s filings allegedly received cash payments through companies they created and controlled. Zukerberg knew that it would look “fishy” if Genuine Title paid cash directly to the loan officers. So, instead, Genuine Title funneled the payments to loan officers through companies created by the loan officers. From 2009 to 2013, Zukerberg and Glickstein arranged for cash payments to the loan officers from Genuine Title in amounts ranging from about $130,000 to $500,000.
Under the consent orders filed today, if entered by the court, the individual defendants would be subject to the following sanctions:
►Jay Zukerberg would be banned from the mortgage industry for five years, required to pay $130,000 in redress and penalties, and prohibited from further violations of RESPA.
►Brandon Glickstein would be banned from the mortgage industry for five years, required to pay $400,000 in redress, and prohibited from further violations of RESPA.
►Adam Mandelberg would be banned from the mortgage industry for two years, required to pay $30,000 in redress, and prohibited from further violations of RESPA.
►William Peterson would be banned from the mortgage industry for two years, required to pay $65,000 in redress, and prohibited from further violations of RESPA.
►Angela Pobletts would be banned from the mortgage industry for two years, required to pay $37,500 in redress, and prohibited from further violations of RESPA.
►Genuine Title LLC would be prohibited from further violations of RESPA.
Mandelberg, Peterson, and Pobletts also would be required to report this action to the Nationwide Mortgage Licensing System & Registry. The action will proceed against the remaining defendant, Gary Klopp.
Under the proposed consent orders, some consumers who obtained loans from the individual loan officers—or, in some cases, other loan officers they worked with—and paid fees for services where legal violations occurred would receive partial or complete refunds of those fees. The Bureau would determine who those consumers are, and would contact consumers who are eligible for relief.