A mortgage banking firm in the Northeast was hit with an order and fine for sharing fees with a hedge fund. But the actions could have been more severe had the lender not been so open about its actions.
1st Alliance Lending LLC acquires troubled home loans from mortgage servicers and provides loss-mitigation financing to the borrowers.
The Hartford, Conn.-based firm will cut borrowers’ principal loan balances then use federally related programs to provide new loans.
In 2010, the lender found a hedge fund to finance its distressed loan purchases. As part of that deal, 1st Alliance split revenues and fees with affiliates of the hedge fund.
But the following year, it found less costly financing and ended the arrangement with the hedge fund.
However, even though it no longer received financing from the hedge fund, it continued to split origination and loss mitigation fees with the fund and its affiliates. Fees were spilt on 83 loans made between August 2011 and April 2012.
Last year, 1st Alliance reported to the Consumer Financial Protection Bureau that it might have violated the Real Estate Settlement Procedures Act as a result of the payments of unearned fees.
The CFPB opened an investigation, and 1st Alliance cooperated — providing requested information that implicated other players and ultimately admitting its liability.
The regulator decided to require 1st Alliance to pay an $83,000 civil money penalty.
A consent order with the CFPB requires that 1st Alliance not violate RESPA again.
“First Alliance’s self-reporting and cooperation, consistent with the bureau’s responsible business conduct bulletin published on June 25, 2013, were taken into account in resolving this matter,” a CFPB statement Monday said.
Additional investigations were opened on the other actors.
