April 21, 2018

CFPB Cracks Down on RESPA Enforcement

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CFPB Cracks Down on RESPA Enforcement

The Consumer Financial Protection Bureau reportedly is taking an aggressive stance in pursuing mortgage, title, and real estate companies who are found violating laws on mortgage referrals. 

CFPB, charged with enforcing the Real Estate Settlement Procedures Act (RESPA), has completed 11 RESPA settlements and lawsuits since taking the job as the enforcer from the Department of Housing and Urban Development in July 2011. 

"CFPB has taken it to a whole different level" of enforcement than HUD did, says Gary Lacefield, who consults on RESPA and fair housing compliance.

Some of its enforcement has been gripping headlines in recent weeks: The watchdog ordered RealtySouth, a major real estate company in Alabama, to pay a $500,000 penalty for allegedly failing to inform home buyers that they were under no obligation to use a title and closing service affiliate. RealtySouth agreed to pay the sum but didn't admitting or denying the bureau's allegations. 

"Real estate companies are allowed to refer customers to affiliates like lenders and title services so long as they also provide a written disclosure that clearly explains that customers are not required to use the affiliate and have the right to shop around," The New York Times reports. CFPB had alleged that RealtySouth's purchase contracts explicitly directed buyers to its affiliate, TitleSouth, and "buried the required disclosures in text about the benefits of its own services," the Times reported. 

In October, the bureau filed a federal lawsuit against a family law firm in Louisville, Ky., that provides real estate closing services, alleging the firm illegally paid for referrals from real estate and mortgage broker companies through a network of shell companies. The law firm has denied any wrongdoing. The case is still pending. 

Source: “Cracking Down on Illegal Mortgage Referrals,” The New York Times (June 5, 2014)

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