On August 18, the California Department of Financial Protection and Innovation (DFPI) announced a $2.3 million settlement with a former mortgage lender and servicer for alleged violations of the California Residential Mortgage Lending Act and California Financing Law. According to the DFPI, the company improperly charged thousands of California borrowers per diem interest in excess of what is permitted under state law.
The settlement follows DFPI examinations dating back to 2016, which identified both per diem overcharges and failures to maintain borrower trust accounts in compliance with the California Residential Mortgage Lending Act. The DFPI required the company to conduct a self-audit and issue refunds to consumers. The matter was resolved ahead of a scheduled administrative hearing.
As part of the settlement, the company refunded $550,316 plus 10% annual interest to impacted borrowers and agreed to surrender both its California Financing Law and California Residential Mortgage Lending Act licenses. The company also paid $1.8 million in administrative penalties.
Putting It Into Practice: The settlement comes as California expands its focus on mortgage issues, including recent legislation revising mortgage servicing and foreclosure requirements (previously discussed here). These developments show a renewed emphasis on borrower protections. Mortgage lenders and servicers operating in California should expect ongoing scrutiny of origination and servicing practices and ensure that compliance procedures are updated accordingly.
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