Consumer protection watchdog also penalizes a real estate broker
The Consumer Financial Protection Bureau (CFPB) has taken action against Freedom Mortgage Corporation (Freedom), handing down a $1.75 million fine to the mortgage lender for providing alleged illegal incentives to real estate brokers in exchange for mortgage loan referrals. Freedom has also been ordered to cease all unlawful activities.
Real estate brokers and agents reportedly received incentives, such as cash payments, paid subscription services, and catered parties, for referring prospective home buyers to Freedom for mortgage loans. This conduct is a violation of the Real Estate Settlement Procedures Act and its implementing regulation.
In line with this, CFPB also issued a separate order against Realty Connect USA Long Island (Realty Connect), a real estate broker, for accepting illegal incentives from Freedom. Realty Connect will pay a fine of $200,000 and has been ordered to cease unlawful activities.
“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.”
Under the Consumer Financial Protection Act (CFPA), the CFPB has the authority to take action against entities violating consumer financial laws.
The Real Estate Settlement Procedures Act prohibits mortgage loan lenders from offering referral incentives and kickbacks in exchange for referring homebuyers. This helps reduce closing costs and increases the competition in the market.
Read more: What are closing costs and how are they estimated?
