The Consumer Financial Protection Bureau (CFPB) recently took action against both a mortgage loan originator and a real estate brokerage for violations of the Real Estate Settlement Procedures Act (RESPA) in connection with illegal kickbacks.
The CFPB found that Freedom Mortgage Corporation violated RESPA by providing real estate agents and brokers with various incentives in return for referrals. Freedom Mortgage provided the real estate agents with free subscription services, hosted and subsidized events for the real estate agents in exchange for mortgage referrals. Freedom Mortgage also entered into marketing service agreements with more than 40 real estate brokerages, and rather than compensate those brokerages for marketing services that were actually performed, they instead used these marketing services agreements as a way to pay for mortgage referrals.
The CFPB found that these actions were “part of a pattern, practice, or course of conduct of giving things of value to create, maintain, or strengthen mortgage referral relationships, in violation of RESPA Section 8(a).” The CFPB ordered Freedom Mortgage to pay a fine of $1.75 million. The CFPB also ordered a real estate brokerage associated with Freedom Mortgage to pay a fine of $200,000.
Marketing service agreements should be entered into with extreme caution, especially in light of the renewed interest in these arrangements by the CFPB. Any such agreements should be reviewed by legal counsel to confirm that they comply with RESPA and don’t allow for any illegal kickbacks between the parties.
