1st Alliance Lending, LLC (First Alliance)
Documents in this case
- Consent order · · 8 p.
- Stipulation · · 5 p.
Case summary
The Consumer Financial Protection Bureau ordered a Connecticut mortgage lender, 1st Alliance Lending, LLC (First Alliance), to pay an $83,000 civil money penalty for violating federal law by illegally splitting real estate settlement fees.
Consent order ()
PDF of this document (8 pages)
Page 2
UNITED STATES OF AMERICA CONSUMER FINANCIAL PROTECTION BUREAU Administrative Proceeding File N o. 2014-CFPB-___ _ In the Matter of:
CONSENT ORDER 1st ALLIANCE LENDING, LLC The Consumer Financial Protection Bureau (Bureau) has reviewed certain business practices of 1st Alliance Lending, LLC (First Alliance) and has identified violations of Section 8 of the Real Estate Settlement Procedures Act, 12 U.S.C. § 2607, and its implementing regulation, Regulation X, 12 C.F.R. § 1024.14 (formerly codified at 24 C.F.R. § 3500.14) (collectively, RESP A). Under Sections 1053 and 1055 of tl1e Consumer Financial Protection Act of 2010 (CFPA), 12 U.S. C. §§ 5563, 5565, the Bureau issues this Consent Order (Order).
I JURISDICTION 1.
The Bureau has jurisdiction over this matter under Sections 1053 and 1055 of the CFPA, 12 U.S.C. §§ 5563, 5565.
2014-CFPB-0003 Document 1 Filed 02/24/2014 Page 1 of 8
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II STIPULATION 2.
First Alliance has executed a "Stipulation and Consent to the Issuance of a Consent O rqer," dated Februaty 20, 2014 (Stipulation), which is inc01p orated by reference and is accepted by the Bureau. By this Stipulation, First Alliance has consented to the issuance of this Order under Sections 1053 and 1055 of the CFPA, 12 U.S.C. §§ 5563, 5565, admitting the findings of fact and conclusions of law set forth below. III FINDINGS AND CONCLUSIONS The Bureau finds the following:
Background 3.
First Alliance is a mortgage lender located in East Hartford, Connecticut. The company primarily provides loss-mitigation refinancing to homeowners. With approval of the mortgagee, First Alliance contacts selected borrowers and offers new loans with reduced principal amounts. First Alliance is a "covered person" under the CFP A, 12 u.s.c. § 5481(6).
4.
For originating certain loans, First Alliance receives an origination fee and a loss-mitigation fee at the closing, or "settlement," of each new mortgage it originates. RESPA 5.
RESPA's Section 8(b) prohibits a person from paying or receiving a fee that has not been earned in connection with a real-estate settlement. 12 U.S.C. § 2607(b). 6.
Both the loss-mitigation and the origination fees First Alliance receives at 2014-CFPB-0003 Document 1 Filed 02/24/2014 Page 2 of 8
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settlement of the mortgages it originates are subject to RESP A's fee-splitting prohibition. The Financing Arrangement 7.
In 2010, First Alliance entered into a contractual relationship with a hedge fund (Hedge Fund) to finance certain mortgage loans that First Alliance was to originate. Hedge Fund created two companies (Company 1 and Company 2) to fund certain of First Alliance's mortgage originations. In exchange, First Alliance gave Company 1 or Company 2 a share of certain revenues relating to tl1e mortgages, including a portion of the loss-mitigation and origination fees paid at settlement. First Alliance's Payment of Unearned Settlement Fees 8.
In August 2011, First Alliance obtained a new warehouse facility and informed Companies 1 and 2 that it would no longer use them to fund its mortgage originations. First Alliance then used the newly secured warehouse financing to fund mortgage originations it made between August 26, 2011 and April 25, 2012 (the Relevant Period). 9.
Nonetheless, First Alliance split origination and loss-mitigation fees with Companies 1 or 2 on 83 of the mortgages originated during the Relevant Period, even though neither company provided financing or any other service for any of those mortgages.
10. In January 2013, First Alliance reported to the Bureau that it may have violated RESPA by splitting loss-mitigation and origination fees relating to the 83 loans with Companies 1 and 2 because they had not performed any settlement or other services for those loans.
11. After receiving this information, the Bureau commenced an investigation. At 2014-CFPB-0003 Document 1 Filed 02/24/2014 Page 3 of 8
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the Bureau's request, First Alliance provided documents and submitted to interviews with Bureau counsel. First Alliance cooperated fully with the Bureau's investigation. 12. Based on the foregoing facts, the Bureau finds that First Alliance violated Section 8(b) ofRESPA, 12 U.S.C. § 2607(b).
IV ORDER 13. IT IS HEREBY ORDERED that First Alliance shall refrain from committing violations of Section 8 of RESPA or any other provision of a "Federal consumer financial law," as defined by 12 U.S.C. § 5481(14). 14. IT IS HEREBY ORDERED that under Section 1055(c) of the CFPA, 12 U.S. C. § 5565(c), by reason of the violations of law set forth in Section III of this Order, and taking into account the factors set forth in 12 U.S.C. § 5565(c)(3), First Alliance shall pay a civil money penalty of $83,000 to the Bureau, as directed by the Bureau and as set forth herein:
A.
Within 10 calendar days of the date this Order is entered, First Alliance shall pay the civil money penalty in the form of a wire transfer to the Bureau or to such agent as the Bureau may direct, and in accordance with wiring instructions to be provided by counsel for the Bureau;
B.
The civil money penalty paid under this Order shall be deposited in the Civil Penalty Fund of the Bureau in accordance with Section 1017(d) of the CFPA, 12 u.s.c. § 5497(d);
C.
First Alliance shall treat the civil money penalty as a penalty paid to the 2014-CFPB-0003 Document 1 Filed 02/24/2014 Page 4 of 8
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government for all purposes. Regardless of how the Bureau ultimately uses those funds, First Alliance shall not:
i. claim, assert, or apply for a tax deduction or tax credit with regard to any federal, state, or local tax for any civil money penalty that First .Alliance pays under this Order; or ii. seek or accept, directly or indirectly, reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, with regard to any civil money penalty that First Alliance pays under this Order.
15. IT IS HEREBY ORDERED that in connection with this action and any related judicial or administrative proceeding or investigation commenced by the Bureau or to which the Bureau is a party, First .Alliance shall: A Require its officers, employees, representatives, and agents to make themselves available for interviews at such times and places reasonably requested by the Bureau;
B.
Require its officers, employees, representatives, and agents to make tl1cmselves available to testify at any deposition, hearing, trial, or other judicial proceeding, as reasonably requested by the Bureau; C.
Produce non-privileged documents and other materials, as reasonably requested by the Bureau; D. With respect to any notices and compulsory process issued by the Bureau for documents or testimony at depositions, hearings, or trials, or in connection with any related investigation: 2014-CFPB-0003 Document 1 Filed 02/24/2014 Page 5 of 8
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1.
accept service by mail or facsimile transmission; ii.
\.Vai,re the territorial limits on service contained in Rule 45 of the Federal Rules of Civil Procedure and any applicable local rules, provided that the party requesting the testimony reimburse First Alliance's travel, lodging, and subsistence expenses at then-prevailing U.S. Government per diem rates; and 111.
consent to any U.S. district court exercising personal jurisdiction over First Alliance for purposes of enforcing any such notices or compulsory process.
v ADMINISTRATIVE PROVISIONS 16. The provisions of this Order shall not bar, estop, or othetwise prevent the Bureau, or any other federal or state agency or department, from taking any other action against First Alliance subject to the Stipulation and release set forth in this Order. 17. This Order shall remain effective and enforceable, except to the extent that, and until such time as, any provisions of this Order shall have been amended, suspended, waived, or terminated in writing by the Bureau or its designated agent. 18. This Order is intended to be, and shall be construed to be, a final order issued under 12 U.S.C. § 5563, and expressly does not form, and may not be construed to form, a contract binding the Bureau or the United States. 19. This Order constitutes a settlement of the administrative proceeding against First Alliance contemplated by the Bureau, based on the Bureau's findings described in 2014-CFPB-0003 Document 1 Filed 02/24/2014 Page 6 of 8
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Section III of this Order.
20. The Bureau releases and discharges First Alliance from all potential liability (other than as set forth in this Order) for violations that have been or might have been asserted by the Bureau based on First Alliance's conduct, as described in Section III of this Order, to the extent such practices occurred before d1e date this Order was entered and were known to the Bureau as of that date. Notwithstanding the foregoing, d1e practices described in Section III of this Order may be used by the Bureau in future enforcement actions against First Alliance and its affiliates for the sole purpose of establishing a pattern or practice of violations or the continuation of a pattern or practice of violations or to calculate the amount of any penalty. This release shall not preclude or affect any right of the Bureau to determine and ensure compliance with the terms and provisions of the Order or to seek penalties for any violations thereof. 21. The provisions of this Order shall be enforceable by the Bureau . . Any violation of this Order may result in the imposition by the Bureau of civil money penalties as set forth in Section 1055(c) of the CFP A, 12 U.S. C. § 5565(c). 22. This Order and the accompanying Stipulation contain the complete agreement between the parties. No promises, representations, or warranties other than those set forth in this Order and the accompanying Stipulation have been made by any of the parties. This Order and the accompanying Stipulation supersede all prior communications, discussions, or understandings, if any, of the parties, whether oral or in writing. 23. Nothing in this Order or the accompanying Stipulation shall be construed as allowing Respondent, its officers, or employees to violate any law, rule, or regulation. 2014-CFPB-0003 Document 1 Filed 02/24/2014 Page 7 of 8
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IT IS SO ORDERED, this .lJ!_"'tiay of February, 2014. Consumer Financial Protection Bureau 2014-CFPB-0003 Document 1 Filed 02/24/2014 Page 8 of 8
Stipulation ()
PDF of this document (5 pages)
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UNITED STATES OF AMERICA CONSUMER FINANCIAL PROTECTION BUREAU Administrative Proceeding File No. 2014-CFPB-___ _ In the Matter of 1st ALLIANCE LENDING, LLC STIPULATION AND CONSENT TO THE ISSUANCE OF A CONSENT ORDER The Consumer Financial Protection Bureau (Bureau) intends to initiate an administrative proceeding against 1st Alliance Lending, LLC (First Alliance) under 12 U.S. C. §§ 5563 and 5565, for its violation of Section 8 of the Real Estate Settlement Procedures Act, 12 U.S.C. § 2607, and its implementing regulation, Regulation X, 12 C.P.R.§ 1024.14 (formerly codified at 24 C.P.R.§ 3500.14) (collectively, RESPA). First Alliance, in the interest of compliance and resolution of the matter, consents to the issuance of the Consent Order to which this Stipulation and Consent to the Issuance of a Consent Order is attached (the Order), and which is incorporated herein by reference. In consideration of the above, First Alliance agrees to the following: 2014-CFPB-0003 Document 2 Filed 02/24/2014 Page 1 of 5
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Jurisdiction 1.
The Bureau has jurisdiction over this matter under Sections 1053 and 1055 of the Consumer Financial Protection Act of 2010 (CFP A), 12 U.S.C. §§ 5563, 5565. Consent 2.
First Alliance agrees to the issuance of the Order and admits the findings of fact and conclusions of law.
3.
First Alliance agrees that the Order shall be deemed an "order issued with the consent of the person concerned" under 12 U.S.C. § 5563(b)(4), and agrees that the Order shall become a final order, effective upon issuance, and shall be fully enforceable by the Bureau under the CFPA, 12 U.S.C. §§ 5563(d)(1), 5565. 4.
First Alliance enters into this Stipulation and Consent to the Issuance of a Consent Order (Stipulation) voluntarily.
5.
The Order resolves the claims asserted or which could have been asserted against First Alliance in this administrative proceeding. First Alliance acknowledges that no promises or representations have been made by the Bureau or any employee, agent, or representative of the Bureau other than those contained in this Stipulation and the accompanying Order.
6.
First Alliance agrees that the facts set forth in Section IV of the Order shall be given collateral estoppel effect, without further proof, in any proceeding or litigation by the Bureau based on the Order or the Findings and Conclusions therein. 7.
The terms and provisions of this Stipulation and the Order shall be binding upon, and inure to the benefit of, the parties hereto and their successors-in-interest. Nothing 2014-CFPB-0003 Document 2 Filed 02/24/2014 Page 2 of 5
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in this Stipulation or the Order, expressly or impliedly, shall give to any person or entity, other than the parties hereto, and their successors hereunder, any benefit or any legal or equitable right, remedy, or claim under this Stipulation or the Order. 8.
The Order constitutes a settlement of the administrative proceeding against First Alliance contemplated by the Bureau based on the Findings and Conclusions set forth in the Order. The Bureau releases and discharges First Alliance from all potential liability for violations that have been or might have been asserted by the Bureau based on First Alliance's conduct, as described in the Order, to the extent such practices are known to the Bureau as of the Effective Date of the Order. Notwithstanding the foregoing, the practices described in the Order may be used by the Bureau in future enforcement actions against First Alliance and its affiliates for the purpose of establishing a pattern or practice of violations or the continuation of a pattern or practice of violations or to calculate the amount of any penalty. This release shall not preclude or affect any right of the Bureau to determine and ensure compliance with the terms and provisions of the Order or to seek penalties for any violations thereof. First Alliance agrees that the Bureau may present the Order to the Bureau Director for signature and entry without further notice. Waivers 9.
First Alliance, by consenting to this Stipulation, hereby waives: a. any right to service of the Order, and agrees that issuance of the Order will constitute notice to First Alliance of its terms and conditions; b. any objection to the jurisdiction of the Bureau, including, without 2014-CFPB-0003 Document 2 Filed 02/24/2014 Page 3 of 5
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limitation, under Section 1053 of the CFP A and Section 8 of RESP A; c. the rights to all hearings under the statutory provisions under which the proceeding is to be instituted; the filing of proposed findings of fact and conclusions of law; proceedings before, and a recommended decision by, a hearing officer; all post-hearing procedures; and any other procedural right available under 12 U.S.C. § 5563 or 12 C.F.R. pt. 1081; d. the right to seek any administrative or judicial review of the Order; e. any claim for fees, costs, or expenses against the Bureau, or any of its agents or employees, and any other governmental entity, related in any way to this enforcement matter or the Order, whether arising under common law or under the terms of any statute, including but not limited to the Equal Access to Justice Act and the Small Business Regulatory Enforcement Fairness Act of 1996;
f.
any other right to challenge or contest the validity of the Order; g. and provision of the Bureau's rules or other requirement of law as may be construed to prevent any ~ureau employee from participating in the preparation of, or advising the Bureau Director as to, any order, opinion, finding of fact, or conclusion of law to be entered under the Stipulation; h. any right to claim bias or prejudgment by the Bureau Director based on the consideration of or discussions concerning settlement of all or any part of the proceeding; and 2014-CFPB-0003 Document 2 Filed 02/24/2014 Page 4 of 5
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1st ALLIANCE LENDING, LLC BY:
Date ~~l"i"t:Vl st ALLIANCE LENDING, LLC cit t ~ C..·,yark ~u"se.l 2014-CFPB-0003 Document 2 Filed 02/24/2014 Page 5 of 5