CFPB Penalizes Freedom Mortgage for Incentives to Real Estate Brokers

The Consumer Financial Protection Bureau (CFPB) has taken action against Freedom Mortgage Corp. for engaging in illegal activities related to mortgage loan referrals.

The CFPB found that Freedom provided real estate brokers and agents with various incentives, including cash payments, paid subscription services and catered parties, in exchange for referring prospective homebuyers to Freedom for mortgage loans, the agency said in a Thursday (Aug. 17) press release. This conduct is in violation of the Real Estate Settlement Procedures Act and its implementing regulation.

Freedom Mortgage Corp. did not immediately reply to PYMNTS’ request for comment.

As a result of its findings, the CFPB has ordered Freedom to cease its illegal activities and pay a penalty of $1.75 million into the CFPB’s victim relief fund, according to the CFPB press release. The firm is prohibited from providing anything of value to other entities in exchange for mortgage referrals.

“The CFPB will be vigilant in rooting out anti-competitive behavior that interferes with consumers’ ability to choose financial products and services,” CFPB Director Rohit Chopra said in the release:.

Freedom is a privately held nonbank mortgage loan originator and servicer based in Boca Raton, Florida, according to the release. In August 2021, Freedom transferred its traditional retail mortgage unit to its wholly owned subsidiary, RoundPoint Mortgage Servicing, which later ceased traditional retail operations.

The Real Estate Settlement Procedures Act is designed to reduce closing costs for homebuyers and promote competition in the marketplace by prohibiting mortgage loan originators from offering referral incentives and kickbacks to other companies in exchange for referring homebuyers, the release said.

The CFPB’s investigation revealed that Freedom violated the Real Estate Settlement Procedures Act in several ways, per the release.

For example, the firm paid for referrals through illegal marketing service arrangements that were linked to mortgage referrals, offered premium subscription services at no charge to real estate agents and brokers who were paired with a Freedom loan officer, and provided subsidized events and gifts to real estate agents and brokers who made referrals.

About four years ago, in June 2019, the CFPB settled a consent order with Freedom over alleged errors tied to mortgage reporting. The company was fined $1.75 million and ordered to take steps to improve compliance efforts.