Mortgage company, brokerage fined nearly $2 million for 'kickbacks'
The Consumer Financial Protection Bureau fined Freedom Mortgage $1.75 million and Realty Connect $200,000 for providing illegal incentives for loan referrals.
- One charge includes Freedom Mortgage using marketing service payments as a way to pay for mortgage referrals.
- According to the CFPB, Realty Connect received $6,000 a month from Freedom for marketing services it didn’t complete.
- “The CFPB will be vigilant in rooting out anti-competitive behavior,” its director said.
A mortgage company and a real estate brokerage have been fined nearly $2 million for providing illegal incentives on mortgage loan referrals.
The Consumer Financial Protection Bureau announced this week that it was penalizing Freedom Mortgage Corporation $1.75 million and Realty Connect $200,000 for what it calls illegal kickback activity.
"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," said CFPB Director Rohit Chopra. "The CFPB will be vigilant in rooting out anti-competitive behavior that interferes with consumers' ability to choose financial products and services."
Real Estate News has reached out to Freedom Mortgage and Realty Connect for comment.
While it's common for real estate agents to recommend mortgage and other home services to clients, Freedom took it a step too far, according to the CFPB. Headquartered in Florida, Freedom entered into marketing services agreements with more than 40 real estate brokerages where Freedom made monthly payments totaling approximately $90,000 to brokerages in exchange for the brokerages' marketing services.
According to the CFPB, Freedom used these marketing services agreements as a way to pay for mortgage referrals, rather than compensate the brokerages for marketing services. Realty Connect, which is based in New York, received $6,000 per month from Freedom, but failed to perform many of the marketing tasks required under the agreement.
Freedom also gave real estate brokers and agents free access to valuable industry subscription services, which provided information concerning property reports, comparable sales, and foreclosure data. It also provided gifts through hosted parties and other events.
In 2019, Freedom was hit with a $1.75 million penalty for intentionally reporting inaccurate ethnicity, gender and race information on mortgage loan data from 2014 to 2017.
The latest fines will go into the CFPB's victims relief fund.
While it is unclear how often mortgage kickbacks happen, the CFPB has taken action in recent years. One of the bigger ones came in 2017, when Prospect Mortgage was fined $3.5 million for allegedly providing cash to brokers for each lead. Since that fine, the company said it has rebuilt its legal, regulatory and compliance practices.
The vast majority of real estate agents and loan originators are law-abiding, said Richard Rosenblum, an independent consultant and a Certified Fraud Examiner and Certified Financial Crime Specialist. But he advises all of them to protect themselves.
"It is strongly advisable that lenders and real estate agents seek expert legal counsel when entering into these types of arrangements whether it is a marketing service agreement or joint venture, versus risking exposure to large fines, penalties, plus legal and reputational costs," said Rosenblum, who has been in the industry for nearly 35 years.