The Consumer Financial Protection Bureau took action against Freedom Mortgage Corporation for engaging in illegal practices involving real estate brokers and agents, providing them with incentives such as cash payments, subscription services. These incentives were allegedly given with the expectation of receiving referrals for mortgage loans, according to an Aug. 17 news release.
"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 the release. "The CFPB will be vigilant in rooting out anti-competitive behavior that interferes with consumers' ability to choose financial products and services."
These actions reportedly blatantly violated the Real Estate Settlement Procedures Act along with its associated regulations. Consequently, the CFPB has issued an order mandating Freedom immediately halt these unlawful activities and impose a fine of $1.75 million to be directed into the CFPB's victim relief fund, the release said.
In a separate case, the CFPB has also directed its focus toward Realty Connect USA Long Island, a real estate brokerage firm, which has been found to have accepted multiple illegal kickbacks from Freedom. As part of its enforcement measures, Realty Connect is compelled to pay a $200,000 penalty and put an end to its unauthorized practices, the release reported.
Freedom Mortgage Corporation, headquartered in Boca Raton, Fla., operates as a privately held nonbank mortgage loan originator and servicer. However, in August 2021, its traditional retail mortgage unit was transferred to its wholly owned subsidiary, RoundPoint Mortgage Servicing, which ceased traditional retail operations in or around August 2022. Realty Connect USA Long Island, on the other hand, is a privately held real estate brokerage firm located in Suffolk County, N.Y., the release said.
The Real Estate Settlement Procedures Act, which aims to lower closing costs for homebuyers and stimulate competition within the market, unequivocally prohibits mortgage loan originators from extending referral incentives or kickbacks to other entities in exchange for directing homebuyers. In its investigation, the CFPB discovered both Freedom and Realty Connect were in direct violation of the Real Estate Settlement Procedures Act, according to the release.
The specific infringements include illegitimate payment for referrals through marketing service arrangements. Freedom engaged in marketing services agreements with more than 40 real estate brokerages, funneling approximately $90,000 per month to these entities in exchange for purported marketing services, the release said.
However, these arrangements were exploited as a conduit for compensating brokerages for mortgage referrals instead of legitimate marketing services rendered. Realty Connect, for instance, received $6,000 monthly from Freedom without fulfilling many of its designated marketing tasks, according to the release.
