RealtySouth, the largest real estate company in Alabama, was ordered by the Consumer Financial Protection Bureau to pay $500,000 for inadequate mortgage disclosures, practices that illegally benefited TitleSouth LLC, an affiliated firm owned by the same holding company that owns RealtySouth.
The CFPB charged that RealtySouth violated the Real Estate Settlement and Practices Act (RESPA), which protects consumers during the home-buying process by prohibiting kickbacks for referrals of real estate settlement services.
"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. "The Consumer Bureau will continue to take action against companies that attempt to modify disclosures and keep consumers in the dark."
RealtySouths preprinted form purchase contracts, which its agents provided to homebuyers preparing to make an offer on a home, either explicitly directed or suggested that title and closing services be conducted by its affiliate, TitleSouth.
RESPA allows real estate companies to refer their customers to affiliated businesses, but the law requires them to provide consumers an Affiliated Business Arrangement disclosure that states their right to shop for a better price and that they are not required to use the affiliated company.
The disclosure RealtySouth gave consumers did not comply with the law as it did not properly highlight consumers rights and the required language was buried in a section of text that also made marketing claims about the companys prices.
The case was referred to the CFPB by the Department of Housing and Urban Development. RealtySouth changed its disclosure forms immediately after being contacted by the CFPB.
