Keller Williams Realty Mid-Willamette, a real estate brokerage located in Corvallis, Oregon, has been penalized and fined by a federal financial watchdog for participating in what has been called an illegal kickback scheme.
According to a January 31, 2017 press release from the Consumer Financial Protection Bureau (CFPB), Keller Williams Realty Mid-Willamette (a.k.a., Willamette Legacy, LLC) accepted illegal payments for referring mortgage customers to Prospect Mortgage, LLC, which was also penalized by federal officials.
Accepting payments or “kickbacks” of this nature is a violation of the Real Estate Settlement Procedures Act (RESPA), CFPB officials stated.
Keller Williams Realty Mid-Willamette Violates RESPA
During the course of its investigation, the Consumer Financial Protection Bureau reviewed the mortgage referral activities of the Corvallis, Oregon-based real estate broker Willamette Legacy, LLC, which does business under the name Keller Williams Mid-Willamette.
According to its consent order, the federal agency found the following law violations:
- As part of some marketing services and lead referral agreements, Keller Williams Mid-Willamette accepted payments (or “kickbacks”) from Prospect Mortgage. These actions violate RESPA rules.
- The real estate brokerage also provided a “cash equivalent” to its real estate agents when they referred a client to that particular mortgage lender. This too is a violation of RESPA guidelines and requirements.
Among other things, the Real Estate Settlement Procedures Act prohibits “steering incentives,” wherein a consumer is steered toward a certain lender or loan product that may or may not be in their best interest.
Illegal Payments for Customer Referrals
As stated in its news release, the CFPB’s investigation found that Keller Williams Mid-Willamette (and another company, ReMax Gold Coast) accepted illegal payments for referrals to the aforementioned mortgage company.
The consumer financial watchdog has prohibited both companies from further violating the Real Estate Settlement Procedures Act. CFPB stated that the companies must not “enter into any agreements with settlement service providers to endorse the use of their services.”
Keller Williams Mid-Willamette real estate brokerage must also pay $145,000 in disgorgement (the repayment of funds obtained illegally), plus an additional $35,000 in penalties. The damage to the company’s reputation, however, could greatly exceed these monetary penalties.
According to its website, Keller Williams Realty Mid-Willamette has several offices located around Oregon. Currently, the brokerage is led by Staci Barnes (Team Leader) and Dolf Peterson (Principal Reviewing Broker), though these individuals were not specifically named in the agency’s consent order.
Prospect Mortgage Paid the Brokerage $4,250 per Month
According to the Consumer Financial Protection Bureau consent order, Prospect Mortgage initially paid Keller Williams Mid-Willamette $4,250 per month as part of a marketing services agreement (MSA). In exchange for this monthly fee, the real estate brokerage “promised to perform certain marketing activities to help Prospect promote its mortgage lending services.”
The mortgage company reportedly established the $4,250 monthly fee by projecting the average number of lead referrals it expected to receive from Keller Williams Mid-Willamette real estate agents, as per the MSA.
Furthermore, the consent order explained that Prospect Mortgage had designated a specific loan officer (who worked directly out of the Keller Williams Mid-Willamette office but was paid by Prospect) to maintain the illegal kickback scheme.
The loan officer reportedly had regular discussions with the brokerage’s leadership team to discuss the effectiveness of the marketing services agreement. The loan officer would then complete a checklist that summarized the monthly meeting. The checklist noted that Keller Williams Mid-Willamette and Prospect Mortgage “review the capture rate and identify missed opportunities amongst agents and consumers.”
In this context, the “capture rate” refers to the percentage or proportion of the real estate brokerage’s clients (who used mortgage loans) that it “successfully steered to Prospect each month.”
The two organization’s eventually switched to a lead agreement. Under this agreement, Prospect no longer paid the fixed monthly amount to the real estate brokerage. Instead, they paid a variable fee “based on the number of consumers whose information [Keller Williams Mid-Willamette] shared with Prospect.”
Note: The information above is based on an official CFPB press release and consent order, both of which were published on January 31, 2017. For more information on this subject, refer to the Consumer Financial Protection Bureau’s website at www.consumerfinance.gov.
Source URL: http://www.consumerfinance.gov/about-us/newsroom/cfpb-orders-prospect-mortgage-pay-35-million-fine-illegal-kickback-scheme/