Government entrapment: providing false information

The Consumer Financial Protection Bureau (CFPB) filed a lawsuit Tuesday against Freedom Mortgage Corporation, accusing it of violating the Home Mortgage Disclosure Act (HMDA) and the 2019 consent agreement by submitting mandatory mortgage loan data that was "riddled with errors. "

The lawsuit was filed after the CFPB issued injunctions against Freedom and Realty Connect USA Long Island two months ago, accusing them of illegal bribes, the first violation of the Real Estate Settlement Procedures Act of 1974 (RESPA) in six years. Freedom must pay $1.75 million to the CFPB's victims fund, and Realty Connect was fined $200,000.

In a lawsuit filed Tuesday, the CFPB alleges that Freedom willfully misrepresented HMDA data about applicants' race and ethnicity in 2019. For example, supervisors allegedly asked mortgage loan officers to select "non-Hispanic white" options whether or not it was accurate.

Freedom was ordered to pay a $1.75 million fine, improve compliance management systems, and pledge to avoid future HMDA violations.

The CFPB says an initial review of 159 files in Freedom's 2020 report found 51 errors and the company was asked to correct those inaccuracies.

"The CFPB is suing Freedom Mortgage for violating a law enforcement order and providing false data about its mortgage activities," CFPB Director Rohit Chopra said. "The CFPB will continue to focus on ending the cycle of repeat offender offenses in the financial industry. "

A spokesperson for Freedom has not yet responded to a request for comment.

In accordance with HMDA regulations, lenders are required to provide information about applications and origination of mortgage loans to the CFPB and other federal regulators. The goal is for the public and regulators to use this information to monitor whether financial institutions are serving housing needs in their communities and identify potential loan trends.

Freedom, with a base in Boca Raton, Florida, provided data on more than 700,000 mortgage loan applications in 2020 and originated nearly 400,000 HMDA loans totaling nearly $100 billion.

In mid-August, the company reached a settlement with the CFPB over allegations that it entered into marketing services agreements with more than 40 real estate agencies, with monthly payments to the agencies totaling about $90,000.

But instead of using those payments to compensate the agencies for the marketing services they provided, Freedom used those marketing services agreements as a means of paying for mortgage loan recommendations, the CFPB said.