Alamo-based RPM Mortgage to pay $19 million in federal order

Company says it accepts settlement with no admission of wrongdoing

Alamo-based residential mortgage lender RPM Mortgage, Inc. was ordered last month to pay a total of $19 million in consumer refunds and penalty fees after the Consumer Financial Protection Bureau (CFPB) determined the company offered incentives to its loan officers to steer customers into costlier mortgages.

By the terms of a consent order approved by the court in June, RPM is ordered to pay $18 million in reparation to its customers and a $1 million civil penalty fee. Company CEO Erwin Robert Hirt was also ordered to pay a separate $1 million civil penalty fee.

RPM said it agreed to the settlement with the CFPB with no admission of wrongdoing in the matter to avoid the cost and distraction of litigation, according to a statement released by the company.

The company's statement also said that throughout the investigation, RPM asserted all of its compensation policies were and are currently fully compliant with the law.

RPM has until Sept. 30 to pay the $18 million portion in full, according to the consent order. The bureau's original complaint against RPM was made on June 4 and the consent order was approved four days later.

According to the CFPB, RPM in 2011 implemented a compensation plan that offered loan officers employed by the company financial incentives to lead consumers into higher-rate mortgage loans, and the forms of compensation came partially from the interest rates of the loans they closed.

The CFPB accused RPM of masking the illegal practices by filtering the interest-rate-based compensation through employee-expense accounts into which RPM would deposit profits from a loan officer's closed loans.

The accusations also indicate that RPM allowed loan originators to tap into their expense accounts to give credits to customers to avoid losing them to competitors and to off-set interest rate reductions, according to the CFPB.

The bureau said that Hirt was instrumental in designing and implementing the compensation plan that violates the Loan Originator Compensation Rule -- enacted in 2011 -- prohibiting companies from offering incentives for loan officers to steer customers into high-rate mortgages.

RPM Mortgage maintains that the bureau's complaint does not allege that steering consumers into higher-rate mortgages actually occurred nor that RPM customers paid higher costs, but rather that the company's compensation policies between 2011-13 created an incentive to steer, according to RPM reps.

"There were no allegations of harm to the company's customers in the filed complaints," Hirt said in a blog post on RPM's website. "We reviewed our pricing in 2011-2013 and confirmed that RPM's rates were always competitive and, for the majority of its loans, matched or beat the average rates in RPM's markets of Northern and Southern California."

Upon receipt of full payment from RPM, eligible consumers will be contacted by a settlement administrator and the $18 million will be distributed amongst them. Consumers do not need to take any action of their own, CFPB reps said.

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Like this comment
Posted by Melody
a resident of Bonde Ranch
on Jul 13, 2015 at 12:29 pm

Corporations are people and people can be crooks. I sure wish I could figure out a way to be included in the settlement. Any tips?

Like this comment
Posted by Please learn the facts
a resident of Another Pleasanton neighborhood
on Jul 13, 2015 at 7:30 pm

If the journalist who wrote this piece did their own research and not just copy a story they read in another paper they would know that this "story" has many missing facts. I am disappointed in The Weekly that they would choose to post a potential harmful story about one of our long time local companies.

2 people like this
Posted by Bill
a resident of Pleasanton Heights
on Jul 14, 2015 at 12:30 am

Nobody agrees to an $18 million judgment just to avoid a hassle. Bunch of crooks.

5 people like this
Posted by Thieves for sure
a resident of Downtown
on Jul 14, 2015 at 9:02 am

Mortgage brokers and realtors were just as much at fault as the banks for the financial collapse. Slimy realtors convinced greedy buyers to buy homes they could never afford with the promise that "the house will appreciate at least X percent in the next year and you can just refinance then". Mortgage brokers encouraged lying on applications in order to collect the huge commissions for the sale and multiple refinances. Banks were so hungry for the loans that they did not perform due diligence on most of the buyers and they funded loans that could never be repaid.

The result was the massive collapse of the housing industry and who benefited? Realtors, mortgage brokers and lenders. Who paid for it? Not the greedy buyers, they were let off the hook with no financial detriment and no tax consequences. Those who paid for this are the same people who pay for so much these days -- those of us who buy only what we can afford, we pay for it as we have agreed to do and we pay the taxes that we owe.

A Multi million dollar settlement against these scummy liars is just a first step. The realtors should be next.

Posted by Name hidden
a resident of Downtown

on Jul 14, 2015 at 9:52 am

Due to repeated violations of our Terms of Use, comments from this poster are automatically removed. Why?

6 people like this
Posted by also
a resident of Amador Estates
on Jul 14, 2015 at 10:05 am

Dear "Thieves..."
While you're pointing additional fingers regarding causes for the real estate collapse, it might be best to go to the main cause.

- Jimmy Carter's 1977 Community Reinvestment Act (CRA) -- another (failed) social engineering experiment of the Left that required banks to lend money to people who had shaky credit.

- Bill Clinton expanded Carter's CRA program exponentially. The Clinton Admin and ACORN (who Obama supported) tracked demographic info on communities and extorted banks to require banks to provide subprime loans. The banks had to abandon traditional standards of evaluating the credit-worthiness of buyers.

- 1992 HUD (Sec. of HUD Democrat Andrew Cuomo) pressured Fannie Mae and Freddie Mac to securitize these loans and made even more money available to banks.

- The Federal Reserve slashed interest rates to artificially influence the housing market.

- All of the above democrat social engineering practices (note they are NOT private sector practices) contributed to the meltdown.

- Republicans including Bush (whom I am not a fan of, despite the fact that I am a conservative) tried to institute more restrictions on the CRA to prevent a collapse. Bush's attempt to prevent more regs upon the CRA were blocked by the Democrats, especially Democrats Barney Frank, Chris Dodd, Chuckie Schumer (surprise, surprise), while they cooked the books and helped themselves to financial incentives.

Links >>>

Web Link

Web Link

Posted by Name hidden
a resident of Birdland

on Jul 14, 2015 at 11:32 am

Due to repeated violations of our Terms of Use, comments from this poster are automatically removed. Why?

8 people like this
Posted by NFP
a resident of Another Pleasanton neighborhood
on Jul 14, 2015 at 4:49 pm

@please learn the facts.....

I am in the business and I read the entire complaint. Loan officer compensation laws changed to create a level playing field for all borrowers. RPM has agreed to pay $19,000,000 (including $1,000,000 from the broker personally) as a result of trying to get around the laws that went into effect to protect borrowers from sleazy brokers. I promise you that the fine wouldn't be being paid if RPM thought they could appeal and win. And while I appreciate the "litigation is expensive so we are paying $19,000,000" response, certainly you understand that litigation is not THAT expensive.

Your statements that some don't know the real facts are baseless. The article is very well written and specifically states that the broker admitted no wrong doing. The article DID NOT say what we are all thinking and that no sane person would pay a $19,000,000 fine to avoid litigation. They could have easily gone further, but did not.

Trying to defend this broker's actions makes the entire industry look bad at a time when we already look bad enough. Clients were screwed and apparently lost millions and an unfair competitive advantage was given over we honest brokers out there (we do exist) who would have done right by these borrowers instead of screwing them out of millions.

After following this over the last month, I am just left wondering why the broker did not lose his license permanently. I'd say a bullet was dodged and it's best to quietly pay the fine and just hope they can still stay in business after being caught like this. I personally would never do a loan with them nor would I ever go to work for them.

Like this comment
Posted by Rob Hirt
a resident of San Ramon
on Oct 11, 2015 at 8:19 pm

I thought our compliance department said we couldn't get sued doing this lo compensation technique. I guess we were wrong.

Posted by Name hidden
a resident of Del Prado

on Oct 12, 2015 at 8:09 am

Due to repeated violations of our Terms of Use, comments from this poster are automatically removed. Why?

Sorry, but further commenting on this topic has been closed.

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