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Federal Trade Commission v. Golden Empire Mortgage

September 23, 2010

FEDERAL TRADE COMMISSION, PLAINTIFF,
v.
GOLDEN EMPIRE MORTGAGE, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Honorable Christina A. Snyder United States District Judge

STIPULATED FINAL JUDGMENT AND ORDER FOR PERMANENT INJUNCTION AND OTHER EQUITABLE RELIEF

Assigned to Honorable Christina A. Snyder

Plaintiff, the Federal Trade Commission ("FTC" or "Commission"), has filed a First Amended Complaint for Permanent Injunction and Other Equitable Relief ("Amended Complaint"), pursuant to Sections 5(a), 13(b), and 19 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 45(a), 53(b), and 57b; Section 704(c) of the Equal Credit Opportunity Act ("ECOA"), 15 U.S.C. § 1691c(c); and Section 202.16(a)(2) of its implementing Federal Reserve Board Regulation B ("Regulation B"), 12 C.F.R. § 202.16(a)(2).

The Amended Complaint alleges that Defendants Golden Empire Mortgage, Inc. ("GEM" or the "Company") and Howard D. Kootstra (the "Individual Defendant") (collectively "Defendants") have violated Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), Section 701(a) of the ECOA, 15 U.S.C. § 1691(a), and Section 202.4 of its implementing Regulation B, 12 C.F.R. § 202.4.

The parties, by and through their respective counsel, have agreed to entry of this Stipulated Final Judgment and Order for Permanent Injunction and Other Equitable Relief ("Order") by this Court, without trial or adjudication of any issue of fact or law, to settle and resolve all matters of dispute arising from the conduct alleged in the Amended Complaint. Defendants deny that they have discriminated unlawfully. Plaintiff and Defendants waive all rights to seek judicial review or otherwise challenge or contest the validity of this Order, and Defendants waive any right that may arise under the Equal Access to Justice Act, 28 U.S.C. § 2412.

The parties having requested the Court to enter this Order, it is therefore ORDERED, ADJUDGED, AND DECREED as follows:

FINDINGS

1. This Court has jurisdiction over the subject matter and over the parties.

2. The Amended Complaint states a claim upon which relief may be granted against Defendants under Sections 5(a), 13(b), and 19 of the FTC Act, 15 U.S.C. §§ 45(a), 53(b), and 57b; and under the ECOA, 15 U.S.C. §§ 1691--1691f, and Regulation B, 12 C.F.R. pt. 202.

3. The activities of Defendants are in or affecting commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C. § 44, as amended.

4. GEM is a "creditor" as defined in Regulation B, 12 C.F.R. § 202.2(l). For purposes of this action only, the Individual Defendant does not dispute the Commission's allegation that he is a "creditor" as defined in Regulation B.

5. The parties, by and through their counsel, have agreed that entry of this Order resolves all matters in dispute between them arising from the facts and circumstances alleged in the Amended Complaint in this action, up to the date of entry of this Order.

6. Entry of this Order is in the public interest.

ORDER

I. DEFINITIONS

For purposes of this Order:

1. "applicant" is synonymous in meaning and equal in scope to the definition of the term in § 202.2 of Regulation B, and means any person who requests or who has received an extension of credit from a creditor, and includes any person who is or may become contractually liable regarding an extension of credit, including guarantors, sureties, endorsers and similar parties;

2. "branch" means any of the offices from which GEM loan originators originate loans, including GEM's headquarters office;

3. "branch manager" means any GEM employee with supervisory authority over any branch;

4. "credit transaction" is synonymous in meaning and equal in scope to the definition of the term in § 202.2 of Regulation B, and means every aspect of an applicant's dealings with a creditor regarding an application for credit or an existing extension of credit (including, but not limited to, information requirements; investigation procedures; standards of creditworthiness; terms of credit; furnishing of credit information; revocation, alteration, or termination of credit; and collection procedures);

5. "creditor" is synonymous in meaning and equal in scope to the definition of the term in § 202.2 of Regulation B, and means a person who, in the ordinary course of business, regularly participates in a credit decision, including setting the terms of credit; and including a creditor's assignee, transferee, or subrogee who so participates; and including a person who, in the ordinary course of business, regularly refers applicants or prospective applicants to creditors, or selects or offers to select creditors to whom requests for credit may be made;

6. "Defendants" means Defendant Golden Empire Mortgage, Inc. and Defendant Howard D. Kootstra, individually, collectively, or in any combination;

7. "discount point" means a percentage of the total mortgage loan amount, normally paid at closing, that the borrower pays to reduce the interest rate on the loan;

8. "ECOA" means the Equal Credit Opportunity Act, 15 U.S.C. §§ 1691-- 1691f, as amended;

9. "GEM" means Golden Empire Mortgage, Inc., a corporation, and its successors and assigns;

10. "loan" means a mortgage loan;

11. "loan officer" means any GEM loan originator who is not a branch manager;

12. "Loan Officer Prices" mean the prices of mortgage loans generated by GEM's electronic pricing system; Loan Officer Prices do not vary across branches;

13. "loan originator" means any employee of GEM who originates mortgage loans on GEM's behalf, including but not limited to loan officers and branch managers;

14. "mortgage loan" means any closed-end loan secured or to be secured by residential real property;

15. "overage" means the amount by which the revenue from a loan origination exceeds the Required Revenue. It is the sum, when positive, of the following items which can be positive () or negative (--) as indicated below:

(i) the amount of branch fees above () or below (--) the Standard Branch Fees;

(ii) the amount of origination fee above () or below (--) the Standard Origination Fee;

(iii) the amount of Loan Officer Price above () or below (--) the par rate;

(iv) any and all discount points paid by the borrower ();

(v) any and all rebates or credits paid to the borrower by GEM, its branch or loan originator (--);

(vi) any and all fees charged to an applicant by GEM, its branch or loan originator that are not Standard Branch Fees, the Standard Origination Fee or Pass-Through Fees (); and

(vii) any and all fees paid by GEM, a branch, or loan originator to one or more third parties on behalf of the applicant without reimbursement from the applicant (--);

Nothing in the above definition shall permit the double-counting of any fees, points, rebates or credits;

16. "Pass-Through Fee" means any fee charged to an applicant by GEM which GEM paid in total to a third party for services that the third party rendered to the applicant in connection with the loan origination;

17. "par rate" means the lowest interest rate for which no discount points are required for an applicant to obtain that rate; a par rate loan has the Loan Officer Price of 100;

18. "point" means one percent of the amount of the mortgage loan;

19. "Regulation B" refers to Federal Reserve Board Regulation B, 12 C.F.R pt. 202, as amended;

20. "Required Revenue" shall consist of the sum of the following: (1) the par rate, (2) any and all Standard Branch Fees, (3) and the Standard Origination Fee;

21. "Standard Branch Fees" mean the two sets of standardized fees, one for conventional loans and another for government-insured loans (i.e., FHA, VA, FSA, RHS), that do not vary across branches. GEM may alter Standard Branch Fees, provided that the amount of Standard Branch Fees does not vary across branches;

22. "Standard Origination Fee" means the standardized fee that does not vary across branches. Currently, GEM's Standard Origination Fee is one percent (1%) of an applicant's loan amount, but GEM may alter the Standard Origination Fee, provided that the Standard Origination Fee does not vary across branches;

23. "underage" means the amount by which the revenue from a loan origination is less than the Required Revenue. It is the sum, when negative, of the following items which can be positive () or negative (--) as indicated below:

(i) the amount of branch fees above () or below (--) the Standard Branch Fees;

(ii) the amount of origination fee above () or below (--) the Standard Origination Fee;

(iii) the amount of Loan Officer Price above () or below (--) the par rate;

(iv) any and all discount points paid by the borrower ();

(v) any and all rebates or credits paid to the borrower by GEM, its branch or loan originator (--);

(vi) any and all fees charged to an applicant by GEM, its branch or loan originator that are not Standard Branch Fees, the Standard Origination Fee or Pass-Through Fees (); and

(vii) any and all fees paid by GEM, a branch, or loan originator to one or more third parties on behalf of the applicant without reimbursement from the applicant (--);

Nothing in the above definition shall permit the double-counting of any fees, points, rebates or credits.

II. INJUNCTION

IT IS THEREFORE ORDERED that Defendants, and each of them, their successors and assigns, and their officers, agents, servants, and employees, and all persons in active concert or participation with any one or more of them who receive actual notice of this Order by personal service or otherwise, directly or through any partnership, corporation, subsidiary, division or other device, are hereby permanently restrained and enjoined from:

A. Engaging in any act or practice that discriminates against an applicant on the basis of national origin regarding any aspect of a credit transaction, including but not limited to originating, approving, or funding mortgage loans for which Hispanic applicants pay higher prices than ...


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