CFPB Press Release Regarding Kickbacks
Late yesterday afternoon the Consumer Financial Protection Bureau (CFPB) released a press release regarding Prospect Mortgage to pay $3.5 Million fine for illegal kickback Scheme. The Real Estate Brokers and Mortgage Servicer that took kickbacks from Prospect are also ordered to pay $495,000.
What is a kickback? It is a form of negotiated bribery in which a commission is paid in exchange for services. In terms of Real Estate, it means that either a Realtor or Lender pays for each client they refer and close. It is unfortunate that these practices were frequently practiced. Due to these types of practices, our guidelines tightened and specific rules were developed. The CFPB stepped in and is responsible for enforcing the Real Estate Settlement Procedures Act, we refer to it as RESPA. Its primary purpose is to eliminate kickbacks or referral fees that tend to increase unnecessarily the costs of certain settlement services. In the past not only Realtors and mortgage lenders received kickbacks, so did appraisers.
This press release informs us as consumers that we need to be more aware. With kickbacks still being implemented, this means we need to protect ourselves. We should always be aware of who we are working with and knowing who we can trust.
When you have a realtor who is pushing you and even demanding that you use “their” lender (and vice versa), you need to ask them why. What are their reasons for insisting on using their referral partner? Especially when you are already pre-approved with a lender whom you are comfortable with and already trust.
Please don’t get me wrong, we have Realtors that we refer our client too and vice versa. When we refer an agent, we always include what they specialize in, how we feel they would be a great Realtor for them. Regardless of our reasons, our recommendations and referrals come out of earned respect for the agent and the value they will bring to our client.
Our preferred agents do the same for us. They have their reasons for recommending us. They will state the reasons why we would be the best mortgage lender for them. There are never any kickbacks! We value our reputation in earning trust, honesty and working with integrity. We also only work with agents who hold the same values.
You should always raise a red flag when you have a Realtor and/or Lender who is insisting on using “their” agent/lender. Always ask why and demand real justifiable answers. It is truly unfortunate that kickbacks are still happening. A lender and/or agent should not need to “pay” for referrals, they should earn them.