Freedom Mortgage has been sanctioned by the Consumer Financial Protection Bureau for providing illegal incentives to real estate brokers and agents for mortgage loan referrals.
The CFPB says Freedom offered agents and brokers perks for past and future loan referrals, a violation of the Real Estate Settlement Procedures Act.
In at least forty cases, Freedom paid for marketing services that were never performed by the brokerages, which the CFPB says amounts to paying for referrals. RESPA particularly addresses illegal marketing service agreements, and the CFPB released detailed guidelines on their use in 2020.
Agents who worked with Freedom were also incentivized through paid subscription services offering important industry data, but they typically had to agree to be paired with a Freedom loan officer before they would be given access, resulting in these agents giving the company more than 1,000 referrals since 2017.
Additionally, Freedom provided catered parties and gifts like sporting event tickets for brokers working with them while refusing event sponsorships for companies that weren’t.
Freedom must pay $1.75 million in the CFPB’s victim relief fund as punishment.
Real estate brokerage firm Realty Connect USA Long Island must also pay $200,000 for knowingly accepting these kickbacks.
“Freedom provided kickbacks to real estate brokers and agents — including those at Realty Connect — in return for mortgage referrals, a clear violation of federal law,” CFPB Director Rohit Chopra said in a statement.
“The CFPB will be vigilant in rooting out anti-competitive behavior that interferes with consumers’ ability to choose financial products and services.”
Chopra has zeroed in on mortgage lending since being appointed CFPB director, especially in the wake of Covid-19 when homeowners became financially vulnerable. His bureau recently warned lenders against financial arrangements which influence or manipulate search results, as well as illegal time-barred debt collection.
Kickback schemes harm consumers as well as law-abiding companies. Summer Goralik, a former California Department of Real Estate investigator, told the Orange County Register that providers need to “flood the DRE with complaints” in order to tackle this problem.
“Even if you do it anonymously, provide as much detail as possible,” he said.
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