The California Department of Business Oversight (“CDBO”) reached an agreement with the parent company of United Wholesale Mortgage to settle allegations that the company violated California state rules on per diem interest charged on residential mortgages. The United Wholesale Mortgage’s parent company, United Shore Financial Services (“United Shore”), agreed to pay a substantial fine of $1.4 million in refunds, provide self-audits of loans made between June 2015 and February 2018, and pay restitution to affected borrowers based on the results of those audits.
According to the CDBO, United Shore violated California law that prohibits lenders from charging interest more than one day prior to the funding of the loan. “Per diem” interest is charged by lenders as a way to prorate loan payments from the date the loan is funded. The interest is calculated from the date the loan funds, and that amount is provided on the closing statement. The CDBO alleges that United Shore violated the state per diem law on thousands of occasions.
Mat Ishbia, the CEO of both United Wholesale Mortgage and United Shore, issued a statement indicating that the situation occurred several years ago and had since been resolved. “This is a documentation issue that concerned about 5% of our loans that were closed in California between 2011 and 2014,” Ishbia said. “We didn’t benefit one penny and not one borrower was harmed.”
Ishbia claims that United Shore had no control over the interest charged, but also said that United Shore has made changes to their procedures to ensure similar issues will not occur in the future. According to United Shore, the problem was that “[t]he escrow agents who [were] selected by realtors or brokers didn’t have the documentation proving they disbursed [the] funds within one day of closing,” but now, there are lender-placed requirements on escrow agents in California that provide accurate documentation on each loan back to 2014.
The CDBO said that the agreement includes $293,127.00 of refunds that United Shore already provided to approximately 3,400 borrowers. “Thus, we refunded borrowers just to be safe – most of the time between $30-$70 per loan,” Ishbia said. “The state also fined us for not holding the escrow agents accountable with proper documentation. We have had this fixed for years now and have been audited on more recent loans, and no issues were found at all.”
The agreement also includes fines that United Shore must pay to the CDBO amounting to $1.1 million for interest overcharges and an additional $125.00 for each additional violation uncovered during the audits.
The CDBO Commissioner, Jan Lynn Owen, issued a statement saying that the agreement will help affected borrowers by providing a refund while also putting processes in place that will prevent future problems. “It compensates borrowers for the financial harm they suffered, and requires the firm to continue following improved policies and procedures designed to prevent this from happening again,” Owen said. “I’m pleased we have reached this agreement with United Shore.”
