PhotoWells Fargo and JPMorgan Chase are facing $24 million in fines and more than $11 million in redress payments to customers for their part in a mortgage kickback scheme.

The Consumer Financial Protection Bureau (CFPB) and the Maryland Attorney General charged that the banks and Genuine Title, a defunct title company, ran an illegal marketing-services-kickback scheme. The Bureau and Maryland also took action against former Wells Fargo employee Todd Cohen and his wife, Elaine Oliphant Cohen, for their involvement.

Genuine Title gave the banks’ loan officers cash, marketing materials, and consumer information in exchange for business referrals.

The proposed consent orders, filed in federal court, would require $24 million in civil penalties from Wells Fargo, $600,000 in civil penalties from JPMorgan Chase, and $11.1 million in redress to consumers whose loans were involved in this scheme. Cohen and Oliphant Cohen also will pay a $30,000 penalty.

“Today we took action against two of the nation’s largest banks, Wells Fargo and JPMorgan Chase, for illegal mortgage kickbacks,” said CFPB Director Richard Cordray. “These banks allowed their loan officers to focus on their own illegal financial gain rather than on treating consumers fairly. Our action today to address these practices should serve as a warning for all those in the mortgage market.”

Quid pro quo

“Homeowners were steered toward this title company, not because they were the best or most affordable, but because they were providing kickbacks to loan officers who referred consumers to them,” said Maryland Attorney General Brian Frosh. “This type of quid pro quo arrangement is illegal, and it’s unfair to other businesses that play by the rules.”

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. As part of the marketing-services-kickback scheme, Genuine Title offered loan officers valuable services to increase the amount of loan business generated. Genuine Title conducted this scheme at several financial institutions. The services the company offered included purchasing, analyzing, and providing data on consumers and creating letters with the banks’ logos that the company had printed, folded, stuffed into envelopes, and mailed.

In return, the banks’ loan officers would increase Genuine Title’s profits by referring homebuyers to the company for closing services. This scheme was especially profitable for the loan officers, who generally are paid by commission.

The Bureau’s investigation identified more than 100 Wells Fargo loan officers in at least 18 branches, largely in Maryland and Virginia, who participated in this scheme. The Bureau alleges that these loan officers referred thousands of loans to Genuine Title over the course of the scheme.

The CFPB also found that loan officers at JPMorgan Chase participated in the marketing-services-kickback scheme with Genuine Title. The Bureau alleges that at least six Chase loan officers in three different branches in Maryland, Virginia, and New York were involved. These officers referred settlement business to Genuine Title on almost 200 loans.

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