CFPB enters into consent order with Freedom Mortgage

The Consumer Financial Protection Bureau announced a consent order with Freedom Home Mortgage Corporation. The enforcement action follows an investigation of errors in reporting on mortgage transactions.

The Consumer Financial Protection Bureau announced a consent order with Freedom Home Mortgage Corporation. The enforcement action follows an investigation of errors in reporting on mortgage transactions.

Freedom has agreed to pay a civil penalty of $1.75 million and “take steps to improve its compliance management to prevent future violations.”

Freedom is one of the ten largest reporters of mortgage information under the Home Mortgage Disclosure Act. HMDA requires covered lenders to collect, record, and report each loan applicant’s and co-applicant’s race, ethnicity, and sex.

During the time period in question, Freedom employed more than 700 loan officers at a time in six to eight call centers and generated most of its HMDA-reportable loan applications through these call centers.

The bureau alleged that Freedom violated HMDA by reporting erroneous data on hundreds of mortgage applications when submitting loan data for 2014 to 2017. According to the bureau, Freedom reported “inaccurate race, ethnicity, and sex information” and that “much of Freedom’s loan officers’ recording of this incorrect information was intentional” during that time.

As part of the loan process, Freedom loan officers would enter applicants’ information into a proprietary data management system, but if certain information was missing, the system would generate a “hard stop” that would prevent the loan file from moving forward in the process. One of these “hard stops” was the failure to enter race or ethnicity data. Some loan officers, however, had a method to get around the hard stop, according to the CFPB.

“To get around this hard stop, certain loan officers were told by managers or other loan officers that, when applicants did not provide their race or ethnicity, they should select non-Hispanic white (regardless of whether that was accurate),” the CFPB said in its consent order.

According to the bureau, the system that created this hard stop was in place from 2014 through October 2017, and the practice of entering non-Hispanic white into the system whether it was true or not was not limited to a “specific location, loan officer, or time period.”

Out of approximately 430 applicants from 2014 through 2017 reviewed by the CFPB, at least 125 applicants did not provide the requested race and/or ethnicity, but Freedom reported these applicants as non-Hispanic white. In addition, on another 300 applications, Freedom reported mortgage applicants as non-Hispanic white even though the applicants had stated that they were not white.