United States of America Consumer Financial Protection Bureau

2017-CFPB-0008 Document 1 Filed 01/31/2017 Page 1 of 22

United States o f Am erica Co n s u m e r Fin an cial Pro te ctio n Bu re au

Adm inistrative Proceeding File No. 20 17-CFPB-0 0 0 8

In the Matter of:

Co n s e n t Ord e r

W illam e tte Le gacy, LLC dba Ke lle r William s Mid-Willam ette

The Consum er Fin ancial Protection Bureau (Bureau) has reviewed the m ortgage

referral activities of real estate broker Willam ette Legacy, LLC, doing business as Keller

William s Mid-Willam ette (KW Mid-Willam ette or Respondent, as defined below), and

has found the following law violations:

x Under certain m arketing services agreem ents, lead agreem ents and desk license agreem ents with a m ortgage len der, KW Mid-Willam ette accepted paym ents from that m ortgage lender in violation of the Real Estate Settlem ent Procedures Act, 12 U.S.C. ? 260 7, and its im plem enting regulation, Regulation X, 12 C.F.R. part 10 24 (collectively, RESPA); an d

x KW Mid-Willam ette also gave a cash equivalent to its real estate agents each tim e an agent referred a client to that m ortgage lender, in violation of RESPA.

The Bureau issues this Consent Order under Sections 10 53 and 10 55 of the

Consum er Finan cial Protection Act of 20 10 (CFPA), 12 U.S.C. ?? 5563, 5565.

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I Ju ris d ictio n 1. The Bureau has jurisdiction over this m atter under sections 10 53 an d 10 55 of the CFPA, 12 U.S.C. ?? 5563 and 5565, and RESPA Section 8, 12 U.S.C. ? 260 7(d)(4).

II Stip u latio n 2. Respondent has executed a "Stipulation and Consent to the Issuance of a Consent Order," dated J anuary 11, 20 17 (Stipulation), which is incorporated by reference and is accepted by the Bureau. By this Stipulation, Respondent has consented to the issuance of this Consent Order by the Bureau under sections 10 53 and 10 55 of the CFPA, 12 U.S.C. ?? 5563 and 5565, without adm itting or denying any of the findings of fact or conclusions of law, except that Respondent adm its the facts necessary to establish the Bureau's jurisdiction over Respondent an d the subject m atter of this action.

III D e fin itio n s 3. The following definitions apply to this Consen t Order: a. "Effective Date" m ean s the date on which the Consent Order is issued. b. "Enforcem ent Director" m eans the Assistant Director of the Office of Enforcem ent for the Consum er Finan cial Protection Bureau, or their delegate. c. "Prospect" m eans Prospect Mortgage, LLC, its subsidiaries, successors, and assigns.

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d. "Real Estate Agents" m eans those persons or entities, whether em ployees or indepen dent contractors, who are affiliated with Respondent and for whom Respondent, directly or indirectly, holds a real estate license allowing them to represent buyers or sellers of real estate property.

e. "Related Consum er Action" m eans a private action by or on behalf of one or m ore consum ers or an enforcem ent action by another governm ental agency brought against Respondent based on substantially the sam e facts as described in Section IV of this Consent Order.

f. "Relevant Period" includes the period from J uly 1, 20 11, through the present.

g. "Respondent" m eans Willam ette Legacy, LLC, Dynam ic Partners, LLC, an d their successors and assign s.

IV Bu re au Fin d in gs an d Co n clu s io n s The Bureau finds the following: Ju ris d ictio n al Fin d in gs an d Co n clu s io n s 4. Respondent is a real estate brokerage firm based in Oregon. Its prin cipal office is located at 1121 N 9th Street, Corvalis, Oregon, an d has three branch offices in the regional area. Approxim ately 130 agents work for Respondent. 5. Respondent is a "person" as defined by 12 U.S.C. ? 260 2(5) and provides real estate brokerage services, which are "settlem ent services" as defined by 12 U.S.C. ? 2602(3).

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Backgro u n d Fin d in gs an d Co n clu s io n s

6. Buying a house is one of the m ost significant financial transactions in the life of a typical consum er. Many consum ers rely on real estate agents to guide them through this process.

7. A real estate agent (called a "real estate broker," under Oregon law1) is a professional who has passed all required real estate classes an d passed the real estate licensing exam in the state in which he or she intends to work. A real estate agent m ust affiliate with a licensed real estate broker (who is called a "principal real estate broker" 2 or "principal broker"3 under Oregon law).

8. Real estate brokers are real estate agents who have com pleted additional licensing requirem ents which allow them to serve as brokers. Real estate brokers m ay work individually or arrange to have agents work under them . Although agents typically work for brokers as independent contractors, brokers generally have the ability to hire and fire their agents. Agents typically pay m onthly office fees to affiliate with a licensed real estate broker. These fees pay for rental space and other expenses related to the costs of doing business.

9. Brokers or agents often m ake recom m endations to their clients for various services, such as m ortgage lending, title insurance, or hom e in spectors. Am ong other things, RESPA prohibits brokers and agents from exploiting consum ers' reliance on these recom m endation s by accepting paym en ts or kickbacks in return for referring consum ers to particular real estate settlem ent service providers. 12 U.S.C. ? 260 7(a).

1 Or. Rev. Stat. ? 696.010(17). 2 Or. Rev. Stat. ? 696.010(13). 3 Or. Admin. R. 863-014-003(9).

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10 . But despite RESPA's prohibition, KW Mid-Willam ette both accepted Prospect's paym ents for referrals and shared a portion of Prospect's paym ents through a cash-equivalent credit to its agents when its agents referred consum ers to Prospect. Fin d in gs a n d Co n clu s io n s Re la te d to Re s po n d e n t Vio la tin g RESPA by Givin g an d Acceptin g Paym en ts fo r Re ferrals o f Re al Estate Se ttle m e n t Business.

11. Respondent signed a m arketing services agreem ent (MSA) with Prospect, effective J uly 1, 20 11. The agreem ent required Prospect to pay Respondent $ 4,250 per m onth. In return, Respondent prom ised to perform certain m arketin g activities to help Prospect prom ote its m ortgage lending services.

12. Prospect set the $ 4,250 m onthly fee by projecting the average num ber of referrals it anticipated it would receive from Respondent and Respondent's agents under the MSA.

13. The MSA provided that Prospect could adjust the m onthly fee it paid to Respondent, based on "the value of the m arketing services perform ed." In practice, Prospect would vary the fees of its MSA agreem ents with its various partners, or m ight cancel the MSA entirely, based on the num ber and value of referrals it received.

14. Prospect designated a specific loan officer--who worked directly out of Respondent's office, but was paid by Prospect--to be in charge of m aintaining Prospect's relationship with Respondent. Prospect required its loan officer to m eet with Respondent on a m onthly basis to discuss the MSA's effectiveness. The loan officer would then com plete a checklist, sum m arizing the m onthly m eeting, and subm it the checklist to Prospect's headquarters. The checklist indicated that Prospect an d Respondent would "review the capture rate and identify m issed opportunities am ongst agents and consumers."

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