PrimeLending will pay more than $1.6 million as part of a settlement with the California Department of Business Oversight, which accused the Texas-based lender of overcharging hundreds of California borrowers for interest on their mortgages.
According to the CDBO, PrimeLending committed multiple violations of a statutory restriction on “per diem interest.”
California law prohibits lenders from beginning to charge interest on mortgages prior to the business day that immediately precedes the day the loan is funded.
According to the CDBO, its office notified PrimeLending of the per diem interest violations on two separate occasions, but said that the lender failed to respond in a timely or satisfactory manner.
Only when the CDBO informed the company it planned to file an enforcement action and suspend the firm’s license to conduct business within the state did PrimeLending begin to comply the with state’s laws, the CDBO said.
As part of the settlement, PrimeLending has already provided $319,524 of refunds to hundreds of customers based on an independent audit of 20,474 of the lender’s loan files, which was ordered by the CDBO.
PrimeLending will also pay restitution to additional borrowers based on the results of that independent audit as required by the settlement.
PrimeLending will also pay $1.3 million in penalties, as well as additional penalties for interest overcharges found by the independent audit.
According to the CDBO, the enforcement action grew out of two regulatory examinations conducted by its office.
“These interest overcharges are one of the most common violations we find in our regulatory examinations of mortgage lenders,” said CDBO Commissioner Jan Lynn Owen. “We will continue to aggressively fight this unlawful nickel-and-diming of California consumers. I’m pleased this settlement provides restitution to so many wronged borrowers.”
Per information provided by the CDBO, PrimeLending originated 5,498 mortgages in California in 2015 with a combined principal balance of $1.96 billion. The number of mortgages represented 28.7% of PrimeLending’s U.S. total, while the combined principal represented 39.4% of PrimeLending’s U.S. total.
In a statement provided to HousingWire, a spokesperson for PrimeLending said the lender is “pleased” to reach the settlement with the CDBO.
“We are pleased to have reached a resolution with the California Department of Business Oversight regarding per diem interest collection activities within the State of California,” the PrimeLending spokesperson said. “PrimeLending cooperated fully with the DBO to quickly refund all impacted customers and to implement monitoring that adheres to California’s statutory and procedural expectations.”