California Announces $1.1M Settlement with South Carolina Mortgage Lender

A South Carolina-based lender recently signed a $1.1 million settlement with the California Department of Business Oversight (DBO) for allegedly overcharging per diem interest to borrowers and servicing loans without a state license.

During regulatory examinations in 2012 and 2016, the DBO Commissioner discovered that the lender had violated the statutory limits on charging per diem interest to borrowers, in violation of the state Financial and Civil Codes.  No penalties were assessed after the 2012 examination.  During the 2016 examination, the Commissioner also found that the lender was servicing residential mortgage loans without proper licensure, in violation of the state Financial Code.  The lender submitted a self-audit report to the Commissioner, identifying refunds of excess per diem interest it had issued for 1,347 loans funded between January 2012 and July 2016.  However, the Commissioner sampled 150 of those loans and found that certain borrowers were still owed significant refund amounts.

As remuneration for these violations, the aforesaid settlement requires the lender to:

• Refrain from loan servicing activities until properly licensed;
• Submit to independent auditing of its past and prospective loan origination and to implement revised policies and procedures to prevent future violations of California law;
• Make additional per diem interest refunds to the 1,347 aggrieved borrowers, expected to total more than $141,000;
• Pay a $1 million administrative penalty to the DBO for the company’s past violations; and
• Pay $125 for each additional violation identified by the independent audits.