Local mortgage lender paying the price for alleged misconduct

(Reprinted in part from:
 The San Jose Mercury, February 2, 2013)

Alamo – Homeowners who allege they were coaxed into home mortgages at far higher rates than they should have paid are suing their loan provider, RPM Mortgage, in federal court, according to court records.

Some loan officers at RPM allegedly bragged about closing mortgages at considerably higher rates than customers should have paid, according to an internal email obtained Wednesday by this newspaper that was part of the court filing against RPM.

“Hi guys. I just want to let you know that I finally got this guy to commit to a rate .750 higher, locked him, and we just received our clear to close,” said the email, written to one or more other employees at RPM.

At the heart of the federal complaint against RPM Mortgage is a Federal Reserve Board rule from September 2010 that prohibited basing loan officers pay on terms or conditions in the mortgage loan – including the interest rate. Mortgage officers can be paid based on the size of the mortgage, but not the rate.

RPM, in a statement Wednesday, denied the allegations and said the complaint is without merit. “RPM intends to dispute its allegations vigorously and establish that the company complied with applicable law,” the company said in a statement.

Alamo-based RPM is 2015 settled a complaint brought by the Consumer Financial Protection Bureau (CFPB) for steering borrowers into costly mortgages. The settlement obliged RPM to pay $19 million, including $18 million to consumers affected by the higher-than-necessary mortgage rates. In addition, the bureau required RPM’s Chief Executive Officer, Robert Hirt, to pay $1 million in a civil penalty.

“RPM rewarded its loan officers for steering consumers into mortgages with higher interest rates,” said CFPB Director Richard Cordray. “Today we are putting an end to RPM’s unlawful practices and holding Robert Hirt personally responsible for his involvement in them.”

DAVE ESHLEMAN’S NOTE: I don’t know what really went on at RPM, so I don’t wish to comment on the lawsuit or the actions by the CFPB. However, I can state as a mortgage industry veteran that the behaviors alleged in the lawsuit were rampant and widespread leading up to the mortgage meltdown of 2006-2007. I am saddened to hear that that these practices may still infect our industry. It further erodes the already dismal opinion many consumers hold about us. Apparently, some lenders failed to learn the painful lessons of the past. According to the lawsuit filed against RPM, a loan officer allegedly wrote this to colleagues after steering his client into a higher rate that paid a higher commission: “Yippy! It feels good. Thanks for all your helpful advice.”

And loan officers are not the only ones who appear to have forgotten the last recession. Word came to us today that the Trump Administration, loaded with Wall Street veterans, was moving to remove a regulation designed to force retirement advisors to work in the best interests of their clients.

Recommended viewing: The Wolf of Wall Street and The Big Short

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