Freedom Mortgage to Pay $1.75 Million Penalty for Illegal Kickback Scheme

Mortgage lender conspired with Realty Connect in referral-for-gifts scheme

The Consumer Financial Protection Bureau (CFPB) has fined a mortgage lender and an associated real estate brokerage firm for a lucrative and illegal kickback scheme that sent business to the mortgage lender in exchange for lavish gifts provided to the real estate operator.

Freedom Mortgage, a nonbank mortgage loan originator and servicer based in Boca Raton, Florida, was fined $1.75 million for the scheme, which the lender operated in conjunction with New York-based real estate broker Realty Connect. Realty Connect was fined $200,000.

“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.”

The CFPB's complaint notes that 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. This conduct violated the Real Estate Settlement Procedures Act and its implementing regulation.

Freedom's illegal conduct included paying Realty Connect for a marketing services contract for which no actual work was performed. This was a means of directing funds to Realty Connect in exchange for referrals. In addition, Freedom provided Realty Connect with access to expensive subscription services and paid for parties and events that benefited Realty Connect.

Photo byKelsey ChanceonUnsplash