The federal complaint against Castle & Cooke Mortgage issued by the Consumer Financial Protection Bureau looks to be the first of many enforcement actions taken against mortgage originators for failing to follow new loan officer compensation rules.
According to the CFPB, Castle & Cooke allegedly paid quarterly bonuses to loan originators who steered borrowers into higher-cost loans and did not have a written policy describing the bonuses.
"The CFPB is clearly sending a message that they are going to actively investigate loan officer compensation plans," says Mitch Kider, chairman and managing partner at the law firm Weiner Brodsky Kider PC, who has no involvement in the case. "This is likely the first of a number of enforcement actions and cases that the CFPB is going to bring."
"In this day and age lenders have to be very, very careful," says Fred Kreger, a current branch manager at American Family Funding, a mortgage bank, and a past president of the California Association of Mortgage Professionals. "The statute says that compensation cannot be arbitrary and the reason they want written procedures is to have clearly defined rules that loan officers abide by, so they cannot charge borrowers differently."
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