CFPB Enters into Consent Orders with Mortgage Loan Originator and Real Estate Brokerage Firm for Illegal Kickbacks

On August 17, 2023, the Consumer Financial Protection Bureau (CFPB) announced that it had taken action against a residential mortgage loan originator that provided illegal incentives to real estate brokers and agents in exchange for mortgage loan referrals.  The CFPB also penalized a real estate brokerage firm that accepted kickbacks from the mortgage loan originator.

The CFPB found that the mortgage loan originator relied on cash payments, paid subscription services, catered parties, and marketing service agreements (MSAs) in order to incentivize brokers and agents for mortgage referrals.  Specifically, the Consent Order alleges that the originator (i) hosted subsidized events for brokers and agents where the originator would pay for food, beverages, alcohol, and, on occasion, entertainment; (ii) offered premium subscription services to brokers and agents, free of charge; and (iii) relied on MSAs to make approximately $90,000 per month in payments to forty real estate brokerages in exchange for purported marketing services while actually using the MSAs as a way to pay mortgage referrals.  These activities, according to the CFPB, violate the Real Estate Settlement Procedures Act (RESPA) and its implementing Regulation X.

The CFPB separately took action against a real estate brokerage firm for accepting valuable kickback backs from the originator.  For example, the brokerage firm accepted a total of $432,000 in monthly MSA payments, accepted free access to a subscription service that provided information on property reports and foreclosure data, and made referrals in return, and attended events that the originator developed specifically for the subject brokerage firm.  The Consent Order expressly notes that this brokerage firm referred the most business to the originator.  The CFPB found that the brokerage firm’s actions violated RESPA and Regulation X.

The CFPB ordered both parties to cease the illegal activity at issue, prohibiting the originator from providing anything of value to other entities in exchange for mortgage referrals and prohibiting the brokerage firm from accepting items of value in exchange for referrals.  Additionally, the originator and brokerage firm were ordered to pay $1.75 million and $200,000 civil money penalties, respectively.