Freedom mortgage hit with HMDA penalty

The CFPB has issued a consent order directing Freedom Mortgage Corporation ("Freedom") to pay a $1,750,000 civil money penalty for knowingly filing HMDA loan application registers during the years 2014 through 2017 with missing or erroneous government monitoring data on the race, ethnicity and sex of applicants and co-applicants on mortgage loans. Freedom reported data on over a million Covered-Loan applications that it had collected during those years. Measured by applications received, Respondent was one of the ten largest HMDA reporters in all four years. Most of its reportable loans were originated through call centers, rather than in face-to-face interviews. The application entry portal used by Freedom's loan officers during the 2014-2017 period included a "hard stop" if an application was entered without race or ethnicity information.

Some loan officers were instructed to enter "Non-Hispanic White" when applicants failed to supply race or ethnicity information, to get around the "hard stop." Recordings of about 430 application interviews reviewed by Bureau staff revealed that at least 125 applicants failed or refused to provide race or ethnicity information but those applicants were reported by Freedom as "Non-Hispanic White." The incorrect reporting spanned the four-year period, seven call centers and 80 loan officers. Other audio records revealed that "Non-Hispanic White" was reported in 300 cases in which the applicant had provided race or ethnicity information other than "non-Hispanic White."

In 2015, Freedom identified a problem in its reporting involving VA-guaranteed loans. When an applicant failed to provide his/her sex, information on marital status was not saved by the application-entry portal, and income information was dropped.from the co-applicant's record. For a year, Freedom used a "work-around" for the system problem and fabricated an entry for the applicant's sex when the applicant failed to provide it in the phone interview.

In many cases in which applicants contacted Freedom to complain that incorrect information had been entered, they were told it could not be corrected.

In addition to paying the civil money penalty, Freedom was ordered to correct its policies, procedures, and internal controls to ensure compliance with the data collection, recording, and reporting requirements set forth in HMDA and Regulation C. The Order specifies a number of the improvements Freedom must make.