ALAMO — Homeowners who allege they were coaxed into home mortgages at far higher interest rates than they should have paid are suing their loan provider, RPM Mortgage, in federal court, according to court records.
Some loan officers at RPM allegedly bragged about closing mortgages at considerably higher rates than customers should have paid, according to an internal email obtained Wednesday by this newspaper that was part of the court filing against RPM. The letter allegedly was written in June 2013 by a mortgage loan specialist with RPM.
“Hi guys. Just want to let you know that I finally got this guy to commit to a rate .750 higher, locked him, and we just received our clear to close,” said the email, written to one or more other employees at RPM.
At the heart of the complaints against RPM Mortgage is a Federal Reserve Board rule from September 2010 that prohibited basing loan officers’ pay on terms or conditions in a mortgage loan — including the interest rate. Mortgage officers can be paid based on the size of the mortgage, but not based on the interest rate.
RPM, in a statement Wednesday, denied the allegations and said the complaint is without merit. “RPM intends to dispute its allegations vigorously and establish that the company complied with applicable law,” the company said in its statement.
The principal plaintiffs in the lawsuit, which is seeking class-action status for the consumers affected by these practices, are Francisco Nanclares of Oakland, Carl Knecht of Oakland, Antonio Ruggerio of San Francisco, Brian Byrne of Walnut Creek and David Glaser of Santa Monica.
The email to RPM Mortgage colleagues about the higher interest rate allegedly was in connection with a mortgage for Byrne.
“Although Byrne did not realize it, that statement reflects the perverse incentive that RPM gave its loan officers to charge clients a higher interest rate than the client was otherwise qualified for,” according to the complaint.
Alamo-based RPM in 2015 settled a complaint brought by the U.S. Consumer Financial Protection Bureau for steering homeowners into costly mortgages. The settlement obliged RPM to pay $19 million, including $18 million to consumers affected by the higher-than-necessary mortgage rates. In addition, the bureau through the settlement required RPM’s chief executive officer, Robert Hirt, to pay $1 million in a civil penalty.
“RPM rewarded its loan officers for steering consumers into mortgages with higher interest rates,” said CFPB Director Richard Cordray. “Today we are putting an end to RPM’s unlawful practices and holding Robert Hirt personally responsible for his involvement in them.”
In a prepared statement Wednesday, RPM noted that the Consumer Financial Protection Bureau did not require RPM to admit any guilt or fault, and the settlement with the federal agency didn’t determine that consumers were actually harmed.
“Supposed technical defects in the alleged prior compensation policies” were the primary remedies imposed by the consumer bureau, according to RPM.
In the current lawsuit, which was filed in a federal court in San Francisco, Dostart, Hannink & Coveney, a La Jolla-based law firm, is seeking to recoup all the revenue that the plaintiffs claim RPM Mortgage captured from its practices.
In telling colleagues about finding a mortgage with a higher interest rate, the RPM Mortgage loan officer allegedly wrote, in part: “Yippy! It feels good. Thank you for all your helpful advice.”
Homeowners sue RPM Mortgage over their mortgage rates - The Mercury News
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