CFPB Penalizes Lender and Broker for Kickbacks

WASHINGTON – The U.S. Consumer Financial Protection Bureau (CFPB) says Freedom Mortgage Corporation (Freedom) provided illegal incentives to real estate brokers and agents in exchange for mortgage loan referrals.

According to the allegation, Freedom provided Realty Connect USA Long Island (Realty Connect) agents and brokers incentives, including cash payments, paid subscription services and catered parties with the understanding that they would refer prospective homebuyers to Freedom for mortgage loans.

That conduct violates the Real Estate Settlement Procedures Act (RESPA) and its implementing regulation. The CFPB ordered Freedom to cease its illegal activities and pay $1.75 million into the CFPB’s victim relief fund.

CFPB separately issued an order against Realty Connect 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 … in return for mortgage referrals, a clear violation of federal law,” says 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.”

Freedom is a privately held nonbank mortgage loan originator and servicer headquartered in Boca Raton, Florida. In August 2021, Freedom transferred its traditional retail mortgage unit to its wholly owned subsidiary, RoundPoint Mortgage Servicing (RoundPoint). Freedom’s RoundPoint subsidiary ceased traditional retail operations on or around August 2022.

Realty Connect is a privately held real estate brokerage firm based in Suffolk County, New York.

RESPA increases competition by prohibiting mortgage loan originators from offering referral incentives and kickbacks to other companies in exchange for referring homebuyers. The specific violations include:

• Paying for referrals through illegal marketing service arrangements: Freedom entered into marketing services agreements with over 40 real estate brokerages, and made monthly payments totaling approximately $90,000 to brokerages in exchange for the brokerages’ marketing services.

  However, Freedom used these marketing services agreements as a way to pay for mortgage referrals, rather than compensate brokerages for marketing services they actually performed. Realty Connect received $6,000 per month from Freedom but failed to perform many of the marketing tasks required under the agreement.

• Offering premium subscription services free of charge: Freedom gave real estate brokers and agents free access to valuable industry subscription services, which provided information concerning property reports, comparable sales and foreclosure data. Freedom paid thousands of dollars per month for one of the subscription services, and Freedom provided access to over 2,000 agents at no cost.

  Freedom often required real estate agents and brokers to agree to be paired with a Freedom loan officer before Freedom would give them access to its subscription services. Since 2017, the real estate agents who received free access to these subscription services – including agents at both Realty Connect and other brokerages – made more than 1,000 mortgage referrals to Freedom.

• Hosting and subsidizing company events and providing gifts: Freedom hosted parties and other events for real estate agents and brokers, including events held exclusively for Realty Connect brokers and agents. Freedom paid for the food, beverages, alcohol and entertainment.

  Freedom would also sometimes give free tickets to sporting events, charity galas or other events where the agents and brokers would have otherwise needed to pay their own way.

  Freedom also denied requests for event sponsorship from real estate brokerages that did not refer mortgage business to Freedom’s loan officers.

CFPB’s orders against Freedom Mortgage Corporation and Realty Connect USA Long Island are posted online.

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