Wells Fargo and JPMorgan Chase would pay $35.7 million for participating in a mortgage kickback scheme with a now-defunct Owings Mills-based title company under a federal consent order filed Thursday, the Consumer Financial Protection Bureau and Maryland Attorney General Brian E. Frosh announced Thursday.
Loan officers at the two banks referred homeowners to the company, Genuine Title, in exchange for cash and marketing services, the CFPB said. The company bought lists of consumer data and sent out letters advertising loans on the banks' behalf; in return, the banks' loan officers referred homebuyers to Genuine for closing services, the bureau said.
The Real Estate Settlement Procedures Act prohibits giving a "fee, kickback, or thing of value" in exchange for a referral of business to a real estate settlement service.
More than 100 Wells Fargo loan officers in at least 18 branches, largely in Maryland and Virginia, referred thousands of customers to Genuine Title as part of the scheme, the bureau said. Six employees from three JPMorgan Chase branches in Maryland, Virginia and New York referred nearly 200 customers, authorities said.
The proposed federal consent order would require Wells Fargo to pay $24 million in civil penalties and $10.8 million in redress to consumers. JPMorgan Chase would pay $600,000 in civil penalties and $300,000 in redress. Both banks would face administrative consent orders prohibiting future violations.
Wells Fargo said it has "fully cooperated" with the investigation, terminated employees who were involved and increased oversight to prevent future violations.
"Wells Fargo holds its team members to the highest ethical standards and does not tolerate improper activities or failure to comply with rules, regulations or company policies," a bank spokesman said.
JPMorgan Chase fired two of the six implicated employees; the other four had already left the bank, a spokesman said.
"We are fully committed to ensuring that our mortgage bankers comply with all legal and regulatory requirements," the bank said in a statement. "These former employees clearly violated our policies, procedures and training."
Wells Fargo failed to address the scheme, despite multiple warnings of its illegality, "including a federal lawsuit explicitly alleging the existence of such agreements," the bureau said. JPMorgan Chase did not have an adequate system to ensure that its loan officers were following the law, authorities said.
The title company offered real estate closing services from 2005 until April 2014, when it went out of business. Its owners, ordered to pay a $30,000 civil penalty, could not be reached for comment.
"Homeowners were steered toward this title company, not because they were the best or most affordable, but because they were providing kickbacks to loan officers who referred consumers to them," Frosh said. "This type of quid pro quo arrangement is illegal, and it's unfair to other businesses that play by the rules."