Magazine article American Banker

Calif. Mortgage Lenders Form Task Force to Fight Kickbacks

Magazine article American Banker

Calif. Mortgage Lenders Form Task Force to Fight Kickbacks

Article excerpt

Mortgage lenders in Southern California say some real estate agents have been demanding illegal kickbacks - in unprecedented numbers and amounts.

The problem has become so severe that the usually close-mouthed industry is going public with the issue and has formed a task force to deal with it.

The demands reportedly range from $500 for the referral of an average loan to $25,000, up front, to begin a relationship.

Such payouts inevitably result in higher costs for borrowers, experts say, and immigrants can be especially vulnerable. Weak enforcement by the federal government contributes to the problem, lenders add.

Market conditions might also be a factor. Because few people are refinancing now due to market conditions, lenders are heavily dependent on business from home buyers - a market in which realty relationships are often decisive.

The newly appointed head of the California Mortgage Bankers Association task force, Kevin Budde, says loan officers have come forward with reports of egregious violations of the Real Estate Settlement Procedures Act. Real estate agents and brokers, he says, are making the first moves.

One loan officer, who asked not to be identified, said that when nationwide real estate chain opened an office in Southern California, he was approached by a broker and sales manager.

"They took me to lunch, saying they had a proposal for me," he said. "Then they told me that they wanted $25,000 up front if I wanted to do business with them."

Another example: a Los Angeles mortgage broker is reportedly aying the rent for a real estate agency in return for exclusive rights to the agency's loans, according to the loan officer.

Mr. Budde, an executive vice president with Temple-Inland Mortgage Corp., said such demands were extreme, but giving a real estate agent half a point for a customer referral was a standard practice. …

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