RESPA Violations Prove Costly for Bank, Builder

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MORTGAGE EXPERT
5 · 17 · 13

A Texas bank has been fined, and a Texas builder has agreed to a settlement over alleged violations of the Real Estate Settlement Procedures Act tied to joint ventures.

Stratford Mortgage Services LC was created in 1999 as a joint venture between Benchmark Bank and home builder Paul Bennett Taylor.

Taylor and Benchmark each owned 50 percent of the venture. Taylor was a vice president of Stratford, and Benchmark Bank’s president served as Stratford’s president and chief executive officer.

Taylor operates his own company, Paul Taylor Corp., from Dallas, while Benchmark is based in the Dallas-suburb of Plano.

According to an announcement Friday from the Consumer Financial Protection Bureau, Benchmark made payments to Taylor in return for Taylor’s referring loans to Stratford.

A total of 32 loans were originated through Stratford, and all of the loans were referred by Taylor. Stratford didn’t advertise itself to the public, and it didn’t have its own office space. A single bank employee handled the origination of the loans — which were processed, underwritten and funded by Benchmark.

Stratford was dissolved on Nov. 18, 2011.

Such kickbacks, according to the regulator, violate Section 8(a) of RESPA.

Taylor similarly operated a joint venture with Willow Bend Mortgage Co. known as PTH Mortgage Co. that yielded him kickback payments, the CFPB said. PTH was formed in 2003.

“In reality both entities were shams designed to allow Taylor to receive the kickbacks,” The CFPB said in the announcement. “His homebuilding company, Paul Taylor Homes, then referred mortgage origination business to the sham entities. However, the work was actually performed by the Bank and Willow Bend. The kickbacks were passed through the sham entities back to Taylor through profit distributions and as a payment through a ‘service agreement.'”

In all, the CFPB said Taylor collected $118,194 in illegal kickbacks, including $106,194 from Benchmark and $12,000 from Willow Bend.

Taylor, along with Paul Taylor Homes Ltd. and Paul Taylor Corp., agreed to a settlement with the CFPB. A consent order requires Taylor to pay the Department of the Treasury the full amount he received in kickbacks. It also prohibits Taylor from engaging in future real estate settlement services, including mortgage origination.

Taylor neither admitted nor denied the alleged RESPA violations.

The CFPB noted that it was alerted to the kickback scheme by the Federal Deposit Insurance Corp.

Benchmark was fined by the FDIC.

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