On August 17, 2023, the CFPB took action against Freedom Mortgage Corporation (Freedom) for providing illegal incentives to real estate brokers and agents in exchange for mortgage loan referrals. According to the CFPB, Freedom provided real estate agents and brokers with numerous incentives, including cash payments, paid subscription services, and catered parties, with the understanding they would refer prospective homebuyers to Freedom for mortgage loans.
Freedom is a privately held nonbank mortgage loan originator and servicer while Realty Connect is a privately held real estate brokerage firm. According to the CFPB’s press release, Freedom and Realty Connect violated the Real Estate Settlement Procedures Act (RESPA) by:
Paying for referrals through illegal marketing service arrangements. Freedom entered into marketing services agreements with over 40 real estate brokerages, however, Freedom used these marketing services agreements as a way to pay for mortgage referrals, rather than compensate the brokerages for marketing services they actually performed. The CFPB found that 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. The CFPB said that 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 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 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.
According to the CFPB, Freedom and Realty Connect violated the RESPA and its implementing regulation. The CFPB ordered Freedom and Realty Connect to:
Cease illegal activities. Freedom is prohibited from providing anything of value to other entities in exchange for mortgage referrals. Realty Connect is prohibited from accepting items of value in exchange for mortgage referrals.
Pay nearly $2 million in penalties. Freedom will pay a $1.75 million penalty into the CFPB victims relief fund. Realty Connect will also pay a $200,000 civil money penalty.
Read the CFPB’s press release here.
The consent order against Freedom can be found here.
The consent order against Realty Connect can be found here.