[Update 1: Story now includes statement from Eghbali]
The Consumer Financial Protection Bureau took action against a former Wells Fargo employee for an illegal mortgage fee-shifting scheme that allowed him to ultimately increase his commissions.
According to the CFPB, David Eghbali referred a substantial number of loan closings to a single escrow company, which shifted its fees from some customers to others at Eghbali’s request.
From there, the CFPB said Eghbali could then manipulate loan costs and ultimately increase the number of loans he closed, increasing his commissions.
The CFPB, as a result, said it filed an administrative consent order requiring Eghbali to pay an $85,000 penalty. The bureau also banned him from working in the mortgage industry for one year.
Tom Goyda, a spokesperson for Wells Fargo, said, “Our existing compliance processes and controls worked effectively to identify and address these isolated activities. Following a thorough review that confirmed the improper activities, we took strong corrective action; including terminating Eghbali and discontinuing any further engagement with the escrow company involved.”
Eghbali, however, in response to Wells Fargo, said, “I was not terminated from Wells Fargo. I resigned in July 2015. Wells Fargo’s representation of its review of my work is especially disingenuous since Wells Fargo never provided me any indication during the relevant period that my activities were possibly in violation of any laws or regulations."
"My number one priority has always been my clients and I have worked diligently on their behalf every day. No consumer was harmed by any action taken by me or by the relationships and negotiations I cultivated to ensure my customers received promised no cost/no fee loans," Eghbali continued. "At no time did I understand or believe that the way I structured my clients’ loans was in violation of RESPA or any other law or regulation."
In response to the bureau's actions, Eghbali said, "Although I did not do anything wrong, nor break any laws, and I have neither denied nor admitted the allegations in the consent order, I will abide the terms of the consent order and refrain from participating in the residential mortgage industry for one year and pay the required fine. However, I will be working professionally over the coming months in areas not involving residential mortgages. I am deeply grateful for the support of so many family, friends and colleagues."
The CFPB found that David Eghbali served as a loan officer for the Wilshire Crescent Wells Fargo branch in Beverly Hills, California, and at least from November 2013 to February 2015, he had an arrangement with an escrow company, New Millennium Escrow, that allowed him to manipulate the prices his customers would pay for escrow services.
For background, the CFPB explained that in California, an escrow company typically provides services such as preparation of certain documents and holding and transferring payments related to mortgage loan refinance transactions. Since consumers obtaining a mortgage do not ordinarily have a preferred escrow company, they often rely on their loan officers to recommend one.
The CFPB’s said that due to direction from Eghbali, New Millennium would reduce its fees for certain customers and make up for its loss by adding fees to loans for other customers.
The bureau found through its investigation that this allowed Eghbali generate business by allowing him to offer “no-cost” loans to price-conscious clients who might have gone to a competitor bank to find a cheaper loan. In exchange for these manipulations, the CFPB said that Eghbali referred nearly all his clients to New Millennium.
“We have taken action against an individual loan officer for illegal mortgage fee-shifting,” said CFPB Director Richard Cordray. “This should send a strong message that the law must be followed not only by large financial institutions, but also by the individuals who work for them.”