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By John Zasada, JD, CAMS – Shareholder, Financial Institutions Group

On Aug. 17, 2023, the Consumer Financial Protection Bureau (CFPB) issued a $1.75 million penalty against Freedom Mortgage Corporation (Freedom) for providing illegal incentives and kickbacks to real estate agents and brokers. The 27-page consent order explains how Freedom violated Section 8(a) of the Real Estate Settlement Procedures Act (RESPA), which prohibits kickbacks for business referrals related to, or part of, settlement services involving federally related mortgage loans. Freedom’s violations included the following:

  • The corporation entered into marketing services agreements with over 40 real estate brokerages where they made monthly payments totaling approximately $90,000 to brokerages in exchange for their marketing services. However, Freedom used these agreements as a way to pay for mortgage referrals, rather than compensate the brokerages for marketing services they actually performed.
  • They 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 provided access to over 2,000 agents for no cost. The corporation often required real estate agents and brokers to agree to be paired with a Freedom loan officer before they would provide 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.
  • Freedom hosted parties and other events for real estate agents and brokers. They paid for the food, beverages, alcohol and entertainment. In addition, they 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 denied requests for event sponsorships from real estate brokerages that did not refer mortgage business to their loan officers.

For more information on how to remain compliant with RESPA and avoid violations, contact our regulatory compliance specialists today.