The Consumer Financial Protection Bureau yesterday announced a mortgage lender was being fined $1.75 million for providing illegal incentives to real estate brokers and agents for referring business to the lender, including cash payments, paid subscription services, and catered parties. The CFPB also fined Realty Connect, a real estate brokerage, $200,000 for accepting numerous kickbacks from the lender.
A copy of the Consent Order with Freedom Mortgage Corp. can be accessed by clicking here.
Under the Real Estate Settlement Procedures Act (RESPA), lenders are prohibited from offering referral incentives and kickbacks in exchange for referring homebuyers. The CFPB said that Freedom entered into marketing services agreements with more than 40 real estate companies where the lender made monthly payments of $90,000 to the brokerages in exchange for their marketing services. The problem is that the payments were used as a way of compensating the brokerages for their referrals rather than the marketing services that were actually performed. Realty Connect, for example, received $6,000 per month from Freedom but failed to perform many of the tasks required under the agreement, according to the CFPB.
Freedom also paid for “valuable” industry subscription services and gave access to those services to brokers and agents at no cost. In some cases, the real estate agent or broker needed to be paired with a Freedom loan officer before being granted access to the services.
Freedom also hosted parties for real estate agents and brokers where it paid for all the food, beverages, and entertainment, and also provided free tickets to sporting events. The lender denied requests for event sponsorship from real estate companies that did not refer business to Freedom’s loan officers.
“The CFPB will be vigilant in rooting out anti-competitive behavior that interferes with consumers’ ability to choose financial products and services,” said Rohit Chopra, the director of the CFPB, in a statement.
