CFPB Files Suit Against Mortgage Lender and Executives for Unlawful Mortgage Lending Practices
The Consumer Financial Protection Bureau, on January 15, 2021, announced a lawsuit against a mortgage lender and three executives for allegedly engaging in unlawful mortgage lending practices. The Bureau’s complaint seeks injunctions against the defendants, as well as damages, redress to consumers, disgorgement of ill-gotten gains, and the imposition of civil money penalties.
The Bureau alleges that since at least 2015, the following misconduct occurred:
· The company structured its mortgage-origination business so that unlicensed salespeople were consumers’ primary points of contact.
· The company’s unlicensed employees took mortgage applications and offered and negotiated mortgage terms.
· The company denied credit to thousands of consumers but sent no adverse-action notice.
· The company regularly misrepresented FHA Streamline Refinance Loans (Streamline Refis) to induce consumers to obtain a purchase mortgage.
· The Individual Defendants actively directed the company’s conduct.
While troubling for a number of reasons, some of the most concerning aspects of the case include the notion that the CFPB would base a significant part of its case on allegations of mortgage licensing violations under state law.
More broadly, the Bureau’s complaint includes such alleged violations as:
· Regulation Z (TILA)- Failure to Ensure that Loan Originators Were Licensed
· Regulation Z- Requiring Consumers to Submit Verifying Documents Before Providing a Loan Estimate
· Consumer Financial Protection Act- Deceptive acts or practices
· CFPA- Deception regarding the FHA streamline program
· Mortgage Acts and Practices—Advertising Rule- Misrepresentations in commercial communications regarding mortgage credit product terms
· Equal Credit Opportunity Act- a lack of written notice of reasons for taking adverse action
· Fair Credit Reporting Act- a lack of written or electronic disclosure when taking adverse action with respect to consumers based in whole or part on information in a consumer report
· CFPA- Offering or providing consumers financial products or services not in conformity with federal consumer financial law
For more information, or copies of filed pleadings, contact Troy Garris at 301-461-8952 or troy@garrishorn.com.
