The Consumer Financial Protection Bureau (CFPB) on Tuesday filed a lawsuit against Freedom Mortgage Corporation for allegedly violating the Home Mortgage Disclosure Act (HMDA) and a 2019 consent order by submitting legally required mortgage loan data that “was riddled with errors.”
The suit comes two months after the CFPB issued orders against Freedom and Realty Connect USA Long Island for allegedly engaging in illegal kickbacks, the first 1974 Real Estate Settlement Procedures Act (RESPA) case in six years. Freedom must pay $1.75 million into the CFPB’s victim relief fund, while Realty Connect was slapped with a $200,000 penalty.
In the lawsuit filed on Tuesday, the CFPB claims that in 2019, Freedom had intentionally misreported HMDA data about applicants’ race and ethnicity. For example, managers allegedly asked loan officers to select non-Hispanic white options regardless of whether that was accurate or not.
Freedom had to pay a $1.75 million penalty, improve compliance management systems and commit to avoiding future HMDA violations.
However, the CFPB said it found 51 errors in an initial review of 159 files in Freedom’s 2020 submission and asked the company to correct these inaccuracies. Freedom corrected errors in 35 required HMDA data fields, resulting in over 174,000 data entries, affecting nearly 20% of the lender’s loan applications, the CFPB said.
“The CFPB is suing Freedom Mortgage for violating a law enforcement order and for providing false data on its mortgage operations,” CFPB Director Rohit Chopra said in a statement. “The CFPB will continue to focus on ending the cycle of misconduct by repeat offenders in the financial industry.”
A spokesperson for Freedom did not immediately reply to a request for comment.
Per the HMDA rules, lenders must report information about loan apps and originations to the CFPB and other federal regulators. The goal is for the public and regulators to use the information to monitor whether the financial institutions are serving the housing needs of their communities and identify potential lending patterns.
Boca Raton, Florida-based Freedom reported data on over 700,000 loan applications in 2020 and originated nearly 400,000 HMDA-reportable loans worth almost $100 billion.
In mid-August, the company settled with the CFPB on allegations that it entered into marketing services agreements with more than 40 real estate brokerages, with monthly payments to brokerages totaling approximately $90,000.
However, Instead of using these payments to compensate the brokerages for marketing services they performed, Freedom used these marketing services agreements as a vehicle to pay for mortgage referrals, the CFPB said.