Banking and Finance Law Daily CFPB settles data reporting claims with Freedom Mortgage Corp. for $1.75M
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Thursday, June 6, 2019

CFPB settles data reporting claims with Freedom Mortgage Corp. for $1.75M

By Nicole D. Prysby, J.D.

The CFPB and Freedom Mortgage Corp. have settled claims that the company’s loan officers were told to replace blanks in mortgage applicant ethnicity data with "non-Hispanic white" regardless of accuracy, in order to remove blank data and allow the file to be saved.

On June 5, 2019, the Consumer Financial Protection Bureau announced a settlement with Freedom Mortgage Corporation for Freedom’s alleged violations of the Home Mortgage Disclosure Act (HDMA). In 2013, 2014, 2015, and 2016, Freedom originated more than $10 billion in home-purchase loans, including refinancings (more than 50,000 transactions). In its press release, the Bureau states that Freedom violated HMDA and Regulation C by submitting mortgage-loan data for 2014 to 2017 that contained inaccurate race, ethnicity, and sex information and that much of Freedom’s loan officers’ recording of this incorrect information was intentional. For example, some loan officers were told that if applicants did not provide their race or ethnicity, they should select non-Hispanic white regardless of whether that was accurate. Under the terms of the consent order, Freedom must pay a civil money penalty of $1.75 million and develop policies and training to ensure compliance with the HDMA and Regulation C in the future (In the Matter of Freedom Mortgage Corp., Admin. Proceeding No. 2019-BCFP-0007).

The Consent Order states that Freedom violated the HDMA and its implementing regulation, Regulation C, in 2014, 2015, 2016, and 2017. The Bureau alleged that Freedom’s Sales Portal software required mortgage officers to collect, record, and report each applicant’s and co-applicant’s race, ethnicity, and sex. If an applicant did not report race or ethnicity over the phone, the software produced a "hard stop" preventing the file from being advanced. However, to get around the hard stop, certain loan officers were told that, when applicants did not provide their race or ethnicity, they should select non-Hispanic white (regardless of whether that was accurate). Recordings of phone calls confirmed that at least 125 applicants did not provide the requested race and/or ethnicity, yet Freedom reported these applicants as non-Hispanic white.

This incorrect reporting occurred in seven different call centers, associated with over 80 different loan officers, in all four years reviewed. In addition, in October 2015, Freedom internally identified that, for certain loans, if the applicant’s sex was selected as "information not provided," Sales Portal did not allow the marital status to be saved and would remove the co-applicant’s income. Rather than addressing this system issue, for nearly a year, Freedom used the "workaround" of selecting a sex when the applicant did not provide one for telephonic applications. In addition, applicants sometimes called to complain that the information recorded was incorrect. At this point in the application process, loan officers no longer had the ability to access Sales Portal to correct the information, and applicants were sometimes told that the information could not be changed.

Per the consent order, Freedom must pay a civil money penalty of $1.75 million, develop policies and training to ensure compliance with the HDMA and Regulation C, and provide written compliance reports to the Bureau at least annually. Freedom consented to the order in a stipulation signed May 23, 2019.

Companies: Freedom Mortgage Corporation

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