HomeStreet Bank fined for kickbacks to real estate agents, homebuilders

HomeStreet Bank fined for kickbacks to real estate agents, homebuilders
Over the course of this year, HomeStreet Bank moved away from the mortgage business, selling off much of its retail mortgage origination business, along with nearly all of the mortgage servicing rights associated with the loans originated in those retail outlets.

At the time, the bank said that it still planned to originate mortgages, albeit a smaller operation with loans sourced through its bank branches, online banking services, and other relationships.

But, some of those relationships have gotten the bank in
trouble with the Federal Deposit
Insurance Corp.

The FDIC announced Wednesday that it reached a settlement
with HomeStreet Bank after an investigation found that HomeStreet had paid
kickbacks to real estate agents and homebuilders in exchange for their mortgage

According to the FDIC, HomeStreet will pay a fine of $1.35
million for violations of the Real Estate Settlement Procedures Act.

As the FDIF states, RESPA “prohibits giving or accepting a
thing of value for the referral of settlement service involving a federally
related mortgage loan.”

And in the case of HomeStreet, the company was providing
payment to real estate brokers and homebuilders for referrals of their mortgage

According to the FDIC, the issue stemmed from HomeStreet’s standalone home loan centers, many of which were sold off this year to Homebridge Financial Services.

The FDIC said Wednesday that an investigation found that
HomeStreet’s home loan centers entered into certain co-marketing arrangements with
real estate brokers in which the bank and brokers marketed their services
together using online platforms.

The FDIC’s investigation also determined that the bank entered
into desk rental agreements where the bank rented space in the offices of real
estate brokers and homebuilders.

According to the FDIC, these arrangements led to the bank
paying fees to the real estate brokers and homebuilders for their referrals of
mortgage business, a violation of RESPA.

“While co-marketing arrangements and desk rental agreements
are permissible where the fees paid bear a reasonable relationship to the fair
market value of marketing or rental costs, such arrangements and agreements
violate RESPA when the amounts paid exceed fair market value and the excess is
for referrals of mortgage business,” the FDIC said in a statement.

As part of the settlement, HomeStreet will pay a fine of
$1.35 million and has terminated all of its co-marketing and desk rental

According to the FDIC, HomeStreet agreed to the settlement without admitting or denying the violations.

In a statement, HomeStreet Bank CEO and Chairman of the Board Mark Mason said that the actions the bank was accused of are commonplace in the industry.

“The marketing activities associated with the alleged violations, which are in common use in the industry today, were conducted by the bank’s former stand- alone home loan center-based mortgage origination business,” Mason said.

“The bank neither admitted nor denied the alleged violations and agreed to settle this matter to maintain its good standing with its regulators and to avoid protracted and costly legal proceedings,” Mason concluded. “These matters are now settled, and we anticipate no further FDIC action related to the alleged violations.”

[Update: This article is updated with a statement from HomeStreet Bank.]
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