A new app that’s designed to help real estate brokerages do more repeat business also refers their clients to a mortgage company that has ties to the app, and which has been accused of steering borrowers into loans with higher rates 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 brokerages and their agents can offer the app to clients as a co-branded lead generation tool.
Realfinity co-founder Erwin Robert Hirt was the CEO and one of two shareholders in RPM Mortgage Inc. when the company agreed to pay $19 million to settle allegations that it doled out illegal bonuses to loan originators who steered consumers into mortgages with higher rates. 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 for this story. Realfinity co-founder and General Manager Luca Dahlhausen provided a statement to Inman about the settlement noting that, “In entering into the consent order, RPM [Mortgage] did not admit to any of the alleged violations of law. Additionally, the CFPB’s complaint does not allege any consumer harm associated with the conduct in question.”
The mortgage company Hirt leads today, the Alamo, California-based LendUS LLC, was sued last month over a suspected data breach that the company admits may have exposed the Social Security numbers and other personal information of more than 12,000 of its clients.
A Feb. 4 lawsuit, which seeks class action status to represent all affected LendUS clients, claims the company “failed to use reasonable industry standard security measures, which would have prevented this type of attack.”
Asked about the data breach, Dahlhausen pointed to a Feb. 8 press release, in which LendUS said that last year an unauthorized person may have accessed clients’ Social Security numbers, driver’s license numbers, financial and payment card account information, passport numbers, tax identification numbers, medical and health insurance information and online account credentials.
Although it’s unclear whether this personal information was actually stolen, LendUS said it had “implemented additional safeguards and technical security measures to further enhance the security of its computer systems and is providing additional security awareness training for its staff.”
Three brands, one lender
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 trade names of LendUS LLC, which sponsors 381 mortgage loan originators who work out of 96 branch locations around the U.S.
Swartz said he was introduced to Realfinity by a LendUS loan officer he’s worked with for 10 years, and liked that the platform generates rates that are specific to his market.
“What I’m getting out of it is a way of bringing value to my past clients, and staying top of mind with them,” Swartz said. “It might be 5 to 10 years between making a sale or moving into a house before they want to get in contact with me again. When they’re thinking about buying or selling, I’m looking for ways to stay top of mind with them, so that they’re going to 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 lenders must be careful to avoid triggering prohibitions against kickbacks for business referrals found in the federal Real Estate Settlement Procedures Act (RESPA). Under RESPA and similar regulations in effect in many states, it’s illegal for a real estate agent or broker to give or receive not only money, but “a thing of value” in return for business referrals.
A “thing of value” can include services of all types at special 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 amounted to a business inducement. The CFPB wrapped up its investigation in 2018 without taking action, although a shareholder lawsuit over Zillow’s alleged failure to disclose the issue in a timely fashion is still being litigated.
On its website, Realfinity promises a “fully digital end-to-end transaction for real estate agent and client,” providing “monetization of past client database through RESPA-compliant repeat business.”
Swartz said he hadn’t heard about the litigation RPM Mortgage and LendUS have been involved in, but is confident that Realfinity provides value to his clients. And RESPA issues aren’t a concern, he said, because he’s not compensated for referring clients through Realfinity, and has always recommended that clients compare rates offered by other lenders.
In an initial phone interview to discuss the company’s business model and plans for growth, Dahlhausen told Inman that the platform currently has 130,000 users, whom he said are past clients of LendUS and Realfinity’s partner real estate brokerages.
After conducting further research on the company and its founders — and discovering that they had been involved in lawsuits that could be pertinent to Realfinity’s customers — Inman asked Dahlhausen, Hirt and former Compass California President Mark A. McLaughlin, who is listed as an adviser to Realfinity on the company’s website, for additional comment.
In a Feb. 3 email inviting Inman to write about the company, McLaughlin said, “This client centric application is co-branded between the LendUS loan officer and the real estate professional that represented the buyer,” suggesting that LendUS is the only lender available to borrowers using Realfinity.
Asked what practices Realfinity has in place to ensure consumers are not steered into costlier mortgages, how Realfinity ensures that consumers’ data is protected, and how the app complies with RESPA, Dahlhausen provided written statements on the litigation against RPM Mortgage and LendUS.
In an email, Dahlhausen also said Realfinity’s only revenue source is a software-as-a-service (SaaS) fee lenders pay for each user. Real estate brokers and Realfinity aren’t paid referral fees on any lender-related closing services, he wrote.
“The end user is generally an existing client of LendUS or its divisions, or the real estate broker,” Dahlhausen wrote.
Hirt and McLaughlin did not immediately respond to requests for comment.