Federal watchdog accuses Rocket Companies’ subsidiary of kickbacks
December 23, 2024
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A federal watchdog claims that a subsidiary of Detroit-based Rocket Companies violated consumer protection laws by giving kickbacks to real estate agents to illegally steer prospective homebuyers to Rocket Mortgage and a related title company.
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The Consumer Financial Protection Bureau (CFPB) filed a lawsuit Monday in U.S. District Court in Detroit against Rocket Homes and multiple national offices of The Jason Mitchell Group, a real estate brokerage.
Rocket Mortgage, Rocket Homes, and title company Amrock are firms under the corporate umbrella of Dan Gilbert’s Rocket Companies.
The lawsuit accuses Rocket Homes of violating the Real Estate Settlement Procedures Act of 1974, which prohibits giving kickbacks, fees or other “things of value” for federally related mortgages.
“Rocket engaged in a kickback scheme that discouraged homebuyers from comparison shopping and getting the best deal,” CFPB Director Rohit Chopra said in a news release. “At a time when homeownership feels out of reach for so many, companies should not illegally block competition in ways that drive up the cost of housing.”
Rocket Homes operates a referral network that matches consumers looking to buy a home with independent real estate brokerages in their area. Rocket Homes gets a referral fee — typically 35% of the brokerage’s commission — if the consumer ultimately buys a home with the brokerage that Rocket Homes referred them to, according to the lawsuit.
Even though Rocket Homes tells consumers that real estate brokers represent the buyer and their interests, Rocket Homes required the agents and brokers who received its referrals to steer people to Rocket Mortgage, the lawsuit claims, and not mention the value of comparison shopping for loans or of programs not offered by Rocket Mortgage.
Rocket Homes then gave priority for future network referrals to those brokers and agents who, in turn, made client referrals to Rocket Mortgage and Amrock, the lawsuit says.
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The CFPB contends that this ability to give future referrals from the Rocket Homes network is a “thing of value” under the 1974 consumer law, whose definition of such things includes the opportunity to participate in a moneymaking program.
As a result, agents receiving Rocket Homes referrals were reluctant to mention potentially better deals for their clients, such as down payment assistance programs or loans on manufactured housing, because Rocket Mortgage didn’t offer such options, the CFPB lawsuit claims.
The lawsuit claims Rocket Homes threatened, suspended and sometimes removed real estate agents who didn’t adequately steer clients away from competing lenders. In one instance, the company “punished” a real estate agent for setting a client up with a local lender who obtained $15,000 in down payment assistance via a special Tennessee housing agency program in which Rocket Mortgage didn’t participate.
The lawsuit also claims that Rocket Mortgage charged higher rates and fees to consumers who went through the Rocket Homes network compared with those who didn’t.
Rocket balks at allegations
Rocket Homes denies the allegations in the lawsuit and issued the following statement late Monday:
“The CFPB’s allegations are false and a distortion of reality. The accusation that homebuyers paid more when working with Rocket Homes is a lie. Additionally, the notion that Rocket Homes penalized real estate brokers or agents for helping clients compare rates and choose the best lender for them is also a lie.
“The facts are clear — data shows one-third of consumers with a loan application already in progress with Rocket Mortgage, before contacting Rocket Homes, chose to close with a different lender. This proves Rocket Homes is committed to empowering homebuyers to make the best decisions for their unique needs. Rocket Homes has always focused on connecting buyers with top-performing agents based on measurable success metrics.”
Rocket’s statement continued: “Director Chopra’s transparent ploy to bolster his political agenda before the changing of administrations is a reckless and shocking misuse of public resources. This flimsy lawsuit is just the latest in a tidal wave of legal actions by a desperate Chopra hungry for headlines.”
The CFPB lawsuit accuses The Jason Mitchell Group and its founder, Jason Mitchell, who grew up in Michigan, of violating the 1970s consumer protection law by allegedly accepting and giving things of value for Rocket Mortgage and Amrock referrals. The brokerage could not immediately be reached for comment.
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According to the lawsuit, the Mitchell group made thousands of referrals, known within the brokerage as “Dog Bones,” to a list of preferred partners that included Rocket Mortgage and Amrock. Jason Mitchell gave $250 gift cards to several agents who made the most Dog Bone referrals each month.
And in exchange for all the Rocket Mortgage referrals, Mitchell expected Rocket Homes to give his brokerage preferred status for its own referrals, the lawsuit says.
Rocket Homes pressured real estate brokerages to hit an 80% capture rate, the lawsuit says, meaning that at least 80% of consumers whom Rocket Homes referred to a brokerage would end up becoming Rocket Mortgage customers.
Not the first controversy
The CFBP lawsuit is the latest federal suit to hit a Rocket Companies firm in recent months.
In October, the Justice Department accused Rocket Mortgage of engaging in discriminatory practices when canceling a Black homeowner’s mortgage refinance application after the owner complained about a lowball appraisal that she believed was a result of racism. The appraiser in the case accused of racism didn’t work for Rocket.
Rocket Mortgage denied the lawsuit’s allegations and went on to sue the U.S. Department of Housing and Urban Development for wrongly accusing the mortgage firm and tarnishing its reputation with the Justice Department lawsuit, which was widely reported.
The majority of Rocket Mortgage’s loans are sold to government-backed entities, such as Fannie Mae and Freddie Mac, or are explicitly backed by the U.S. government through programs like Federal Housing Administration loans.
This story was updated to include additional information.
Contact JC Reindl: 313-378-5460 or [email protected]. Follow him on X @jcreindl
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