A California mortgage bank, Guarantee Mortgage Corp., must pay a civil penalty of $228,000 for paying its branch managers based, in part, on the interest rates of the loans they closed. 

The Loan Originator Compensation Rule, which the CFPB has enforced since July 21, 2011, protects consumers from being steered into costlier loans by banning loan originators from receiving compensation based on the interest rates of the loans they close. 

Guarantee, which is no longer in business, was a mortgage banking firm that operated 10 branches in the San Francisco area. 

The CFPB’s investigation found that Guarantee violated the Loan Originator Compensation Rule by paying loan originators based on the interest rates charged on loans they had originated. The compensation was funded by payments Guarantee made to marketing services entities owned in part by the company’s branch managers and other Guarantee loan originators; the originator-owners drew a portion of those fees as compensation. 

As a result, branch managers received compensation based on the interest rates of the loans they originated in violation of the Loan Originator Compensation Rule during that period. 

The consent order requires Guarantee, which is in the process of dissolving, to pay the $228,000 to the CFPB’s Civil Penalty Fund.

A copy of the consent order filed today is available athttp://files.consumerfinance.gov/f/201506_cfpb_consent-order-guarantee-mortgage-corporation.pdf

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