Independent Banker - April 2024 - 34

PORTFOLIO
◎FOCUS COMPLIANCE
RESPA and HMDA
violations: What
to know
In the second half of 2023, the CFPB penalized Freedom
Mortgage for violating both RESPA and HMDA. Here's what
community banks need to know about complying with
these acts. By Katie Kuehner-Hebert
ommunity banks can take away
some noteworthy lessons from
recent enforcement actions and
litigation against Freedom Mortgage
Corp for illegal kickbacks and
improper reporting of applicants' race
and ethnicity.
C
The Consumer Financial Protection
Bureau (CFPB) took action in August
against the Boca Raton, Fla.-based
company for providing illegal
incentives to real estate brokers and
agents in exchange for mortgage
loan referrals, in violation of the
Real Estate Settlement Procedures
Act (RESPA).
Illegal incentives included monthly
cash payments totaling roughly
$90,000; free access to paid industry
subscription services such as property
reports, comparable sales and
foreclosure data; and exclusive event
invitations-with the understanding
that the brokers and agents would
refer prospective homebuyers to
Freedom for mortgage loans.
The CFPB ordered Freedom to
cease its illegal activities and pay
$1.75 million into the CFPB's victim
relief fund.
RESPA terms and conditions
Under RESPA Section 8, a lender can
give a gift or an incentive to a broker
or an agent, but not in exchange for
a referral.
However, in certain circumstances,
gifts or promotions directed to a
referral source are not prohibited
if they are a " normal promotional
or educational activity, " as long as
they meet two conditions under
Regulation X: The activities are
not conditioned on referral of
business; and the activities do not
involve defraying expenses that
otherwise would be incurred by the
referral source.
" Section 8 is extremely broad,
so banks need to develop a policy
34 // ICBA Independent Banker // April 2024
Illustration by Andreas Prott/Adobe

Independent Banker - April 2024

Table of Contents for the Digital Edition of Independent Banker - April 2024

Contents
Independent Banker - April 2024 - Cover1
Independent Banker - April 2024 - Cover2
Independent Banker - April 2024 - Contents
Independent Banker - April 2024 - 2
Independent Banker - April 2024 - 3
Independent Banker - April 2024 - 4
Independent Banker - April 2024 - 5
Independent Banker - April 2024 - 6
Independent Banker - April 2024 - 7
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