Lender, brokerage implicated in alleged kickback scheme
Homebuyers have filed six lawsuits claiming that a national mortgage company paid a local Raleigh firm $15K/mo for exclusive referrals in violation of RESPA.
A national mortgage company has been pulled into six separate lawsuits over an alleged pay-to-play scheme involving a local real estate brokerage.
CrossCountry Mortgage and Raleigh Realty were named as defendants in five cases filed in June and one case filed at the end of July in U.S. District Court for the Eastern District of North Carolina.
What the lawsuits are about: The suits were filed by homeowners who claimed the defendants violated the Real Estate Settlement Procedures Act (RESPA) by engaging in an improper referral arrangement involving kickbacks, which are prohibited under RESPA.
As a result, the borrowers were subject to excessive closing fees and interest rates that were higher than what competitors were charging, according to the filings.
A $15K 'pay-to-play' scheme: In his July 30 complaint, homeowner Jeremiah VonBlohn alleged that CrossCountry and Raleigh Realty had a co-marketing agreement that appeared lawful on its face, but in practice was "simply a cover" for an unlawful pay-to-play scheme.
Specifically, the filing stated that CrossCountry would pay Raleigh Realty $15,000 a month — "disguised as payments for legitimate services" — in exchange for receiving all of Raleigh Realty's buyer referrals, with a kickback of $500 per referral.
No leeway for agents: Ryan Fitzgerald, the brokerage's owner and president, "continuously instructed and required Raleigh Realty agents to exclusively use CrossCountry to provide the mortgage financing that their clients would inevitably need," according to the filing.
The complaint included text messages allegedly sent by Fitzgerald telling his firm's agents to send every Raleigh Realty client to CrossCountry Mortgage or risk losing out on future leads. It also claimed that agents were reprimanded or suspended if they provided clients with mortgage information from other lenders.
"Because real estate agents work exclusively on commission, Mr. Fitzgerald's repeated threats to withhold leads were tantamount to threats to terminate the agents' livelihoods," the filing stated.
Founded in 2003, CrossCountry Mortgage has more than 7,000 employees operating more than 700 branches across the U.S., according to its website. Raleigh Realty is an independent real estate brokerage with roughly 30 agents located in Raleigh, North Carolina.
Real Estate News has reached out to Fitzgerald for comment. A spokesperson for CrossCountry Mortgage said in an email that CrossCountry Mortgage does not comment on pending legal matters.