ALAMO — An Alamo-based mortgage lender and its CEO have been fined $20 million for illegally paying bonuses and higher commissions to loan agents to steer consumers into costlier loans.
The Consumer Financial Protection Bureau said RPM Mortgage CEO Rob Hirt paid his employees bonuses to place clients in loans with higher interest rates, earning tens of millions of dollars in payments from 2011 to 2013.
“RPM rewarded its loan officers for steering consumers into mortgages with higher interest rates,” said CFPB Director Richard Cordray. “Today, we are putting an end to RPM’s unlawful practices and holding Robert Hirt personally responsible for his involvement in them.”
Most of the fine — $18 million — will be used to refund consumers affected by the scheme. Eligible mortgage holders will be notified by the bureau and receive refund checks in the mail. A bureau spokesman said it was unclear how many people would receive compensation.
The other $2 million — Hirt is personally responsible for $1 million — will go into the bureau’s civil penalty fund, the agency said. Bureau spokesman Sam Gilford said RPM has agreed to pay the fines.
In a statement Monday, Hirt said, “The company chose to settle this matter without an admission of wrongdoing in order to avoid the cost and distraction of litigation. RPM values its reputation as a respected mortgage lender and has maintained from the beginning of the investigation that all of its compensation policies were and are fully compliant with the law.”
RPM has more than 70 branches throughout California, Oregon, Washington, Texas, Arizona and Colorado, according to its website, and in 2013 its more than 800 employees funded $5.9 billion in residential mortgage loans. The company goes by the motto: “Can Do, Will Do.”
According to the federal agency, in April 2011, RPM instituted the illegal compensation plan that would pay loan officers based on the interest rate they secured with customers.
“The CFPB also found that Hirt, RPM’s CEO, was responsible for managing the design and implementation of this illegal compensation plan,” the bureau wrote in a statement.
The company hid the scheme by filtering the proceeds through “employee-expense accounts,” the bureau said.
From April 2011 to January 2012, RPM paid 511 bonuses to loan agents, according to federal regulators.
The company maintains that there is no evidence its customers paid higher costs.
The consumer bureau, a new federal agency created by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, began enforcing the Loan Originator Compensation Rule in July 2011. Other lenders have been fined for similar schemes.
It is not the first time RPM and Hirt have been in trouble with the federal government. In July 2011, the Federal Deposit Insurance Corp., or FDIC, acting as the receiver for folded Indymac Bank, sued RPM Mortgage, Hirt and his wife, Tracey, who is RPM’s president, for breach of contract, negligence and negligent hiring/supervision.
The two sides settled for $550,000, an FDIC official said.
Contact Matthias Gafni at 925-952-5026. Follow him at Twitter.com/mgafni.
