Third California Lender Fined for LOC Violations

For the third time this month a mortgage company, this one in the process of dissolution, has been charged with violating the Loan Originator Compensation (LOC) Rule.  The Consumer Financial Protection Bureau (CFPB) said it has ordered Guarantee Mortgage Corporation, a California Mortgage Bank, to pay a civil penalty of $228,000 for its alleged infractions.

According to CFPB, the company, which operated 10 branches in the San Francisco Bay Area, paid loan originators in part based on the interest rates of loans they originated.  Branch managers, and in some cases loan originators set up marketing services entities into which Guarantee made compensation payments. According to the consent order the fees were based on the profitability of the associated branch and on the interest rates charged on the originated loans.  The entities' owner-operators drew a portion of those fees as additional compensation. 

As a result, CFPB said, branch managers received compensation based on the interest rates of the loans they originated in violation of the Loan Originator Compensation Rule that has been enforced since July 2011.

Since June 1 CFPB has taken action against two other California mortgage lenders, Provident Funding Associates and RPM Mortgage, Inc. and individually against the latter's CEO, Erwin Robert Hirt, for violations of the LOC.  Like Guarantee, RPM had also set up separate accounts in an apparent attempt to conceal the additional compensation.