CFPB: Utah Lender Steered Borrowers into High-Cost Mortgages

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The Consumer Financial Protection Bureau filed a federal complaint Tuesday against Castle & Cooke Mortgage for giving bonuses to loan officers who allegedly steered consumers into mortgages with higher interest rates.

In a 10-page complaint filed in U.S. District Court in Utah, the CFPB alleges that the Salt Lake City mortgage bank and its two top officers violated the Federal Reserve's loan officer compensation rule, which bans compensation based on a loan's terms such as interest rates.

The bureau alleges that Castle & Cooke, a privately held company owned by David H. Murdock, the chairman and chief executive of Dole Food Co., failed to maintain a written policy explaining the method used to calculate quarterly bonuses and did not record what portion of its quarterly bonuses were attributable to specific loans.

The CFPB estimates that 150 loan officers were paid average quarterly bonuses ranging from $6,100 to $8,700 since April 2011.

Matthew A. Pineda, the company's president, vigorously denies the allegations.

"We don't compensate loan officers based on the terms of a loan and we are not motivated to upsell," Pineda says.

Fewer than 10% of employees were eligible for bonuses in the past year, Pineda says. Moreover, the company set up five criteria for loan officers to meet in order to be eligible for a bonus, he says. To qualify officers must: close at least nine loans a quarter; meet quality-control standards; have a 70% pull-through ratio of loans that get funded; be a current employee; and have a pipeline of performing loans with no early payment defaults.

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