The Consumer Financial Protection Bureau has fined real estate firm RealtySouth $500,000 for inadequate mortgage disclosures resulting in illegal kickbacks.
The bureau alleges that Birmingham, Ala.-based RealtySouth improperly steered customers toward using an affiliated business for title and closing services in a violation of the Real Estate Settlement and Practices Act.
RealtySouth’s disclosures “explicitly directed or suggested that title and closing services be conducted by its affiliate, TitleSouth,” the bureau said. The preprinted forms did not properly highlight consumers’ rights, and required language was buried in marketing claims about the company’s prices.
RESPA does not prohibit real estate companies from referring customers to affiliated businesses, but they must disclose the relationship, provide a written estimate of costs and make it clear that customers are free to choose which provider to employ.
Besides the fine, RealtySouth must also ensure that its disclosures comply with RESPA and that its training materials emphasize that its agents cannot require the use of affiliates.
The Department of Housing and Urban Development referred the case to the CFPB, which in turn contacted RealtySouth. The company changed its disclosure forms immediately after being contacted, the bureau said.
RealtySouth and TitleSouth are both owned by HomeServices of America, Inc., the real-estate division of Berkshire Hathaway.
“Disclosures give consumers the power to make informed financial decisions, and buying a house is among the biggest financial decisions most people ever make,” said CFPB Director Richard Cordray in a press release. “The Consumer Bureau will continue to take action against companies that attempt to modify disclosures and keep consumers in the dark.”