Bribery, Conflict of Interest in the Mortgage Industry
Mortgage lenders typically do their jobs without acting unethically. However, in some cases, these lenders do things that could be considered immoral. For example, they may bribe banks to take on loans or they may originate loans for family members.
There is a lot of risk in the mortgage industry – on both sides. Borrowers must make a judgment call as to whether or not they can take on a specific mortgage payment each month, while the lender could face the loss of an investment. If a home goes into foreclosure or the borrower files for bankruptcy, the lender faces a loss, even though the loan is secured by property – a home.
Because of this risk, some lenders engage in bribery or conflict of interest. Some lenders engage in these practices without a second thought. However, both are considered unacceptable forms of behavior and could result in penalties such as license suspension or loss.
What is Bribery?
Bribery involves giving something to someone to influence them. For example, a lender may bribe a bank to give money to a borrower by offering a large commission or other reward. Bribery often involves a significant amount of money or gifts. However, even a small gift may be prohibited, as it may influence a person’s actions.
Various entities involved in the mortgage industry have taken steps to prevent bribery. Commercial banks are governed by the federal Bank Bribery Act, making gifts and commissions illegal. The Real Estate Settlement Procedures Act (RESPA) also prohibits unearned fees and other kickbacks.
What is a Conflict of Interest?
When a person seeks to promote their own interests rather than the interest of their employer or company they are serving, this creates a conflict of interest. A conflict of interest may be illegal at the state or federal level and may also violate company policy. When a borrower is a family member, that is a conflict of interest. So is promoting a service or product associated with a bank that the mortgage lender does regular business with. A conflict of interest also occurs when a lender receives money and gifts for certain transactions. Anything the lender does that conflicts with their responsibilities to their employer can be considered a conflict of interest.
To avoid conflicts of interest, employers should have a code of ethics in place. They should also have monitoring systems in place so they know when a lender is engaging in this type of behavior.
Keep Your License With Help From a Tampa Mortgage Lenders Licensing Lawyer
Loans are a risk for mortgage lenders. There is always a risk that the borrower may not make good on their promise to pay back the loan. As such, some lenders engage in unethical behavior so they can make money either way.
Bribery, conflicts of interest and other unethical tactics can lead to license loss. Protect your mortgage lenders license with help from Tampa mortgage lenders licensing lawyer David P. Rankin. To schedule a consultation, fill out the online form or call (813) 968-6633.