Prospect Mortgage LLC has agreed to a settlement with state mortgage regulators. At issue are fees charged to borrowers by an appraisal affiliate.
On Thursday, an announcement from the Multi-State Mortgage Committee indicated that Prospect has reached a settlement with 50 state regulators.
An examination conducted by eight states in April 2012 uncovered
a pattern of charging improperly disclosed and unsupported fees, the statement said.
The fees were
paid to Prospect-affiliate C2C Appraisal Services LLC.
The agreement and consent
order indicated that C2C charged a “settlement service fee” for services that were actually performed by Prospect employees.
Prospect claims that it stopped collecting the fees in January 2014.
The alleged actions, which impacted more than 70,000 borrowers, occurred between October 2010 and March 2012.
“Prospect’s past practice of charging unsupported fees is unacceptable and borrowers must be compensated for monies they paid to Prospect erroneously,” Karyn Tierney, chair of the Multi-State Mortgage Committee, said in the statement. “This settlement allows the company the ability to continue operating while sending a strong message to the industry that this kind of behavior must be stopped.”
The agreement calls for Prospect to pay $2.8 million in restitution to impacted borrowers. That works out to $40 per borrower plus interest at 10 percent.
In addition, Prospect will pay
an administrative penalty of roughly $7.4 million to the state regulators.
Prospect will also
revise its policy-and-procedure manuals specifically addressing the areas of mortgage operations, fees, disclosures, requirements for charging consumer credit cards and record retention. The lender will need to submit the new manuals to the Multi-State Mortgage Committee for review.
For its part, Prospect — which didn’t admit to doing anything wrong — said in its own news release that the alleged actions occurred before its present management was in place.
Former Fannie Mae chief executive officer Michael J. Williams is chairman and CEO of Prospect. He was became chairman in 2012 and appointed CEO in 2014.
“This settlement is a significant step forward for our company, our employees, our valued customers and industry partners. … This agreement resolves all legacy allegations contained in the 2013 examination report,” Prospect General Counsel Joseph Grassi said in the statement.
In July, the Sherman Oaks, California-based company announced that it would eliminate the use of marketing services agreements. That move was expected to be completed by the end of September.
“Recent interpretations of Real Estate Settlement Procedures Act requirements introduce substantial uncertainty as to the rules and requirements applicable to MSAs,” Prospect said.
