The Consumer Financial Protection Bureau and the Consumer Protection Division of the Office of the Attorney General of Maryland (CPD) have responded to a filing by Gary Klopp, a mortgage originator, in the contempt of court proceeding brought by the CFPB and the CPD.
The contempt of court proceeding arose from an April 2015 lawsuit brought by the Bureau and the CPD against a now-defunct Maryland title company, Genuine Title, LLC, Klopp, and others in connection with charges that they violated the Real Estate Settlement Procedures Act by engaging in a loan referral and kickback scheme (see Banking and Finance Law Daily, April 29, 2015).
As part of the November 2015 "Stipulated Final Judgment and Order," Klopp settled allegations that he engaged in a mortgage kickback scheme with Genuine Title, LLC, by referring mortgage clients to Genuine Title in exchange for payments made to his companies.
Contempt of court. The CFPB and CPD brought the contempt of court action against Klopp in June 2017. They asserted that, despite the specified prohibitions in the November 2015 order, Klopp has been, among other things: dealing with consumers’ mortgage loan applications by communicating with lenders about the applications; dealing with third-party businesses engaged in offering settlement services by communicating with lenders, title companies, and appraisers; and accepting a fee, kickback, or thing of value, when accepting free lunches for his branch office from soliciting title companies (see Banking and Finance Law Daily, June 9, 2017).
Good faith efforts. In his response to the show cause order, Klopp argued that the CFPB and CPD "mischaracterized the dictates and scope" of the November 2015 Order and "grossly exaggerated the conduct of Mr. Klopp." He further argued that he had "continually made good faith efforts to comply substanitally with the Stipulated Final Judgment which, in part, lacked unequivocal command of proscribed conduct." Klopp’s response concluded that "[the] CFPB and CPD impermissibily seek to use these contempt proceedings and this Court to renegoitate and toughen the Stipulated Final Judgment."
Turned on its head. In their opposition filing to Klopp’s response, the Bureau and the CPD contend that "Klopp turns the Stipulated Final Judgment and Order … on its head and misstates the law." The CFPB and the CPD further argued that, despite Klopp’s claims of good faith, he "has not shown that he has made any effort to comply with the Stipulated Judgment, has not shown that he has substantially complied, and has not shown that he was unable to comply."
The CFPB and the CPD also maintain that "Klopp’s argument ignores or mischaracterizes the plain language of the Consent Judgment, the prohibitions it imposes, and the statutory definitions it contains." They noted, "Klopp appears to interpret the Stipulated Judgment’s limited exception to the ban on his participation in the mortgage industry as a right to participate in the mortgage industry subject to limited prohibitions."
Companies: Genuine Title, LLC
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