By KIMBERLEY HAAS
Officials at the Consumer Financial Protection Bureau are warning shoppers about pay-to-play mortgage comparison shopping platforms.
CFPB Director Rohit Chopra said in a statement on Tuesday that given current mortgage interest rates, it is important for homebuyers to shop and compare loan offers.
“We are working to ensure that online platforms are not manipulating their search results in order to coerce kickbacks from lenders,” Chopra said.
Rates for a 30-year fixed-rate mortgage hovered just above 6% last week.
In a press release, CFPB officials said that American consumers looking for the best deal on mortgages often turn to comparison-shopping platforms and mobile apps.
“Many of the websites and applications claim to offer ranked lists of providers suitable to the individual consumer’s needs. After providing their personal data to an online site to get access or run a customized search, people reasonably expect a neutral and fair presentation of the providers that may best meet their mortgage or other settlement needs,” the press release states.
“Companies operating these digital platforms appear to shoppers as if they provide objective lender comparisons, but may illegally refer people to only those lenders paying referral fees.”
Officials remind the public that financial arrangements which influence or manipulate search results are illegal.
Under the Real Estate Settlement Procedures Act, it is illegal for companies to receive kickbacks and referral fees in connection with a transaction involving a residential mortgage or other real estate settlement service.
Officials at the CFPB say that eliminating illegal kickback schemes fosters fair competition by forcing lenders and other providers to compete on a level playing field and that benefits consumers.
“When shoppers use a lender that is not the best option for their needs, they may end up with a lower quality lender or paying thousands more in closing costs or interest,” the press release states.
Companies could be violating the RESPA if they coerce payments from mortgage professionals, unlawfully steer consumers, present service providers in a non-neutral way, or if they bias their platform’s formula to favor preferred providers, officials say.
Chopra said the CFPB’s action to rein in the manipulation of digital mortgage comparison-shopping platforms is part of a broader effort to end the illegal biasing of ostensibly neutral platforms.
In a statement, Chopra said regulators have already taken action against companies for similar offenses.
In 2020, officials at the Federal Trade Commission reached a settlement with the operators of LendEDU.com to resolve allegations that the company falsely claimed their website provided “objective,” “accurate,” and “unbiased” information about consumer financial products.
Chropra said although LendEDU.com dealt with student loans, personal loans, and credit cards – engaging in both fake reviews and pay-to-play steering of consumers – if similar conduct is observed in the mortgage market, officials at the CFPB will not hesitate to act.
“Today’s announcement complements the CFPB’s efforts to ensure the mortgage market remains resilient and competitive, particularly in the current rate environment,” Chopra said.
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