Feds Accuse Castle & Cooke of Illegal Home Mortgage Scheme
Federal regulators are cracking down on practices that led to the 2008 subprime mortgage crisis that crippled the national economy. One of their first targets is Castle & Cooke, a huge real estate developer that also operates as a mortgage lender in 22 states, including Hawaii.
The Consumer Financial Protection Bureau says that Castle & Cooke Mortgage illegally rewarded loan officers who steered homebuyers to mortgages with higher interest rates 鈥斅燼 practice that hurts the consumer, but that profits the lender.
The company allegedly paid out more than 1,100 illegal bonuses to loan officers who “up-sold” mortgages to tens of thousands of customers since April 2011, when new consumer protection laws forbidding the practice went into effect, according to a government .
It鈥檚 not clear how many loan officers in Hawaii received such bonuses. About half, or more than 150 employees across the nation, were rewarded for the illegal sales practice, according to the bureau, which filed a in federal court against Castle & Cooke Mortgage and two of its executives on Tuesday.
We “are taking action against the type of practices that precipitated the financial crisis,鈥 the bureau’s director, Richard Cordray, said in a statement. 鈥淐onsumers should be able to get a mortgage without worrying about how the financial incentives of their loan officers may cause them to pay higher rates than they actually qualify for.鈥
Jeff Bell, marketing director for Castle & Cooke Mortgage, based in Salt Lake City, Utah, denied the charges. 鈥淲e do not compensate loan officers based on the term of a loan and we do not motivate loan officers to up-sell loans,” he told Civil Beat.
Rusty Rasmussen, the branch manager for Castle & Cooke Mortgage in Hawaii, said that the company has been cooperating with federal officials for more than a year and anticipates 鈥渁n amicable resolution to this complex regulatory matter.鈥
The consumer bureau wants the mortgage company to reimburse homeowners hurt by the alleged interest rate scheme, as well as to pay civil penalties, which could be significant.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, penalties can amount to $5,000 for each violation, $25,000 for reckless violations and $1 million for knowing violations.
The bureau鈥檚 complaint alleges that Castle & Cooke 鈥渞ecklessly or knowingly鈥 paid the bonuses in violation of consumer rules.
Castle & Cooke, which was long referred to as one of the 鈥淏ig Five鈥 companies in Hawaii, is owned by billionaire David Murdock. The company made a fortune in pineapple before shifting its focus to real estate development and home lending.
Castle & Cooke Hawaii has developed subdivisions in Kapolei, Makakilo and Mililani. The company received approval from the state Land Use Commission last year to proceed with a planned 5,000 home master-planned community known as Koa Ridge, located near Mililani.
Rasmussen said that about half of the loans issued by the mortgage company in Hawaii are for homes within Castle & Cooke’s subdivisions.
