The Consumer Financial Protection Bureau (CFPB) fined Freedom Mortgage last week for illegally providing incentives to real estate brokers and agents in exchange for mortgage loan referrals.
The CFPB alleges that Freedom, based in Boca Raton, Fla., provided real estate agents and brokers with cash payments, paid subscription services, catered parties, and other incentives with the understanding they would refer prospective homebuyers to Freedom for mortgage loans.
This conduct is in violation of the Real Estate Settlement Procedures Act, which prohibits mortgage loan originators from offering referral incentives and kickbacks to other companies in exchange for referring homebuyers.
The CFPB is ordering Freedom to cease its illegal activities and pay $1.75 million into the CFPB’s victim relief fund.
Separately, the CFPB separately issued an order against a real estate brokerage firm, Realty Connect USA Long Island, for accepting numerous illegal kickbacks from Freedom. Realty Connect will pay a $200,000 penalty and cease its unlawful conduct.
“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. “The CFPB will be vigilant in rooting out anti-competitive behavior that interferes with consumers’ ability to choose financial products and services.”
Among the violations, the CFPB found that Freedom entered into marketing services agreements with over 40 real estate brokerages where Freedom made monthly payments totaling approximately $90,000 to brokerages in exchange for the brokerages’ marketing services. However, the CFPB said that Freedom used these marketing services agreements as a way to pay for mortgage referrals, rather than compensate the brokerages for marketing services they actually performed.
Realty Connect received $6,000 per month from Freedom, but did not perform many of the marketing tasks required under the agreement.
Freedom is also charged with providing real estate brokers and agents free access to valuable industry subscription services. Freedom provided this access to over 2,000 agents for no cost. The comapny also hosted and subsidized company events and provided gfts. Freedom paid for the food, beverages, alcohol, and entertainment. The company also sometimes gave free tickets to sporting events, charity galas, or other events where the agents and brokers would have otherwise needed to pay their own way.