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By John Zasada, JD, CAMS – Shareholder, Financial Institutions Group

On Oct. 10, 2023, the Consumer Financial Protection Bureau (CFPB) announced it filed a lawsuit against Freedom Mortgage Corporation (Freedom), a large mortgage lender and servicer, for violating the Home Mortgage Disclosure Act (HMDA) and a 2019 CFPB Consent Order. In 2020 alone, Freedom reported HMDA data on over 700,000 mortgage loan applications and originated nearly 400,000 HMDA-reportable loans worth almost $100 billion.

Back in 2019, Freedom found itself in hot water as the CFPB determined the company had intentionally misreported HMDA data about applicants’ race and ethnicity. 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 it was accurate. The 2019 order required Freedom to pay a $1.75 million penalty, improve its compliance management system and avoid future HMDA violations.

The lawsuit, filed in the U.S. District Court Southern District of Florida, alleges the HMDA data Freedom submitted for 2020 contained widespread errors across multiple data fields, and the errors constitute violations of HMDA, the Consumer Financial Protection Act and the 2019 order. According to the CFPB, after they found 51 errors in an initial review of 159 files in Freedom’s 2020 submission, the company had to resubmit its data. In the resubmission, Freedom corrected errors in 35 different required HMDA data fields. This amounted to errors in over 174,000 data entries affecting almost 20% of Freedom’s mortgage loan applications.

For more information on how to avoid HMDA compliance violations, contact Doeren Mayhew’s regulatory compliance specialists today.