A new app designed to help real estate agents get more repeat business is also directing its customers to a mortgage company with ties to the app, which it has accused of baiting borrowers into higher-interest loans and failing to protect their personal information.
Realfinity’s HomeDashboard for Homeowners app helps consumers track their home’s value, calculate their purchasing power, and learn about refinancing opportunities to pay for remodeling projects or consolidate debt. Real estate agents and their agents can offer the app to clients as a co-branded lead generation tool.
Realfinity co-founder Erwin Robert Hirt was CEO and one of two shareholders of RPM Mortgage Inc. when the company agreed to pay $19 million to settle allegations that it was giving out illegal bonuses to loan originators who steered consumers towards higher-interest mortgages. Hirt also agreed to pay an additional $1 million civil penalty as part of the settlement with the Consumer Financial Protection Bureau (CFPB).
Hirt did not respond to requests to comment on this story. Realfinity co-founder and general manager Luca Dahlhausen issued a statement to Inman regarding the settlement, noting, “At the closing of the consent injunction, RPM [Mortgage] did not admit any of the alleged infringements. Furthermore, the CFPB’s complaint alleges no consumer harm related to the conduct in question.”
The mortgage company Hirt runs today, Alamo, Calif.-based LendUS LLC, was sued last month over an alleged data breach that the company admits may have exposed the social security numbers and other personal information of more than 12,000 of its customers .
A Feb. 4 lawsuit seeking class-action status to represent all affected LendUS customers alleges that the company “failed to employ reasonable industry-standard security measures that would have prevented this type of attack.”
When asked about the data breach, Dahlhausen referred to a Feb. 8 press release in which LendUS said that an unauthorized individual may have accessed customers’ Social Security numbers, driver’s license numbers, financial and payment card account information, passport numbers, and tax identification numbers in the past year, Health and medical insurance information and online account credentials.
Although it is unclear whether this personal information was actually stolen, LendUS said it has “implemented additional safeguards and technical safeguards to further enhance the security of its computer systems and is providing additional security awareness training to its employees.”
Three brands, one distributor
Realfinity announced on LinkedIn last year that its first “clients” were LendUS, American Eagle Mortgage, and RPM Mortgage. According to the Nationwide Multistate Licensing System, American Eagle Mortgage and RPM Mortgage are trading names of LendUS LLC, which sponsors 381 mortgage loan originators operating out of 96 offices across the United States
Last month, Realfinity announced partnerships with two California-based real estate agents, Atria Real Estate and Engel & Völkers LA South Bay.
Kevin Swartz, founder of Atria Real Estate, based in Mountain View, California, said that as a subsidiary of Side Inc., “I’ve always been drawn to the white label approach.”
Swartz said he was introduced to Realfinity by a LendUS loan officer he has worked with for 10 years and liked that the platform generates interest rates specific to his market.
“What I get from this is a way to add value to my past clients and be remembered by them,” Swartz said. “It can be 5 to 10 years between selling or moving into a house before they want to contact me again. When they’re thinking about buying or selling, I look for ways to make their minds up so they reach out to me.”
Nick Peters, President and CEO of Engel & Völkers LA South Bay, did not immediately respond to requests for comment.
Realfinity says it’s RESPA compliant
Any service that helps real estate agents refer clients to mortgage companies must be careful not to trigger kickback bans on business referrals contained in the federal Real Estate Settlement Procedures Act (RESPA). Under RESPA and similar regulations in many states, it is illegal for a real estate agent or agent to give or receive not just money but “something of value” in return for business referrals.
A “thing of value” can include services of any kind at discounted or free rates, payment of another person’s expenses, or educational seminars, programming, and training sessions.
Zillow’s co-marketing program for agents and lenders, for example, drew scrutiny from the Consumer Financial Protection Bureau, which enforces RESPA, over concerns that allowing Zillow Premier Agents to invite “premier lenders” to share advertising costs provided a business incentive. The CFPB closed its investigation in 2018 without taking any action, although a shareholder lawsuit alleging Zillow’s failure to disclose the facts remains pending.
On its website, Realfinity promises a “fully digital, end-to-end transaction for real estate agents and clients” that will enable “monetization of the database of past clients through RESPA-compliant repeat business”.
Swartz said he has not heard about the litigation involving RPM Mortgage and LendUS, but is confident Realfinity is delivering value to its clients. And RESPA issues are not a concern, he said, because he is not compensated for referring clients through Realfinity and has always advised clients to compare interest rates offered by other lenders.
In an initial phone interview to discuss the company’s business model and growth plans, Dahlhausen told Inman that the platform currently has 130,000 users, who he believes are previous clients of LendUS and Realfinity’s partner real estate agents.
After further researching the company and its founders and determining that they were involved in litigation that may be relevant to Realfinity’s clients, Inman asked Dahlhausen, Hirt and former President of Compass, California, Mark A. McLaughlin , who is listed as a consultant, is on Realfin’s company website for further comments.
In a Feb. 3 email prompting Inman to write about the company, McLaughlin said, “This client-facing application is a co-branding between LendUS’ loan officer and the real estate professional who represents the buyer,” which is what suggesting that LendUS is the only lender available to borrowers using Realfinity.
When asked what practices Realfinity has put in place to ensure consumers are not steered into more expensive mortgages, how Realfinity ensures consumer privacy is protected, and how the app complies with RESPA, Dahlhausen provided written explanations of the litigation against RPM Mortgage and LendUS away.
In an email, Dahlhausen also said that Realfinity’s only source of revenue is a software-as-a-service (SaaS) fee that lenders pay for each user. Realtors and Realfinity are not paid finder fees for lender-related closing services, he wrote.
“The end user is generally an existing customer of LendUS or its divisions, or the real estate agent,” Dahlhausen wrote.
Hirt and McLaughlin did not immediately respond to requests for comment.
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