Congratulations to the CFPB for another enforcement action involving illegal kickbacks. This time the fines amounted to over 35 million dollars and involved two mortgage giants – Wells Fargo and JPMorgan Chase. The illegal conduct involved a title company providing “marketing services” to loan officers. Those services included providing loan officers with purchased consumer data and creating letters with the banks’ logos that the title company had printed, folded, stuffed and mailed.
The interesting thing about this enforcement action is that it comes on the heels of the Michigan enforcement action for similar conduct. While these actions are great for the consumer and may provide a deterrent for some, the fact is that the title company referral business has now consumed the marketplace. It is routine for title companies to tempt anyone in a position to refer title business. Realtors, loan officers and even attorneys often illegally exploit their client relationship in order to profit from a title company referral.
Most consumers do not know what a title company is, let alone what they do. That lack of knowledge makes consumers extremely vulnerable to kickback schemes as they rely upon the advice of their trusted Realtor, loan officer or attorney. A title company plays important roles in the real estate transaction process. They investigate and clear title and manage the closing process. They are the last chance to catch untoward conduct and prevent mortgage fraud. If the title company is financially tied to the Realtor, loan officer, attorney or builder, that puts those entities in an inappropriate position of control over parts of the transaction for which they have no business controlling. No one sitting at the closing table should have any relationship to the title company.
It is time that attorneys and regulators began to look at their state licensing and common law when it comes to title company referrals. State laws typically provide far more consumer protections than federal law in the form of longer statutes of limitations, higher standards of conduct and far more severe penalties.
The best advice we can provide to consumers is to get involved in the title company selection process. Do not let your Realtor, loan officer, attorney or builder ever steer you towards a conflicted title firm. If you are going to rely on the advice of your professional when it comes to the title company selection, insist that they avoid affiliated or financially tied title firms and that they engage in thorough due diligence and provide you with the information that they have found.