Lender slapped with $1.75M fine for bungling demographic data

Freedom Mortgage reported inaccurate information on race and sex between 2014 and 2017. The firm originated more than 50,000 mortgages per year during that period

A major New Jersey mortgage lender will fork over a $1.75 million fine for, among other things, entering clients’ ethnicity as white even when they declined to provide information on race or said they belonged to another ethnicity.

The Consumer Financial Protection Bureau (CFPB) announced the fine against Freedom Mortgage on Thursday. The Mount Laurel-based company is a major mortgage provider, issuing more than 50,000 loans a year between 2013 and 2016 and employing more than 700 loan officers across multiple call centers, according to the CFPB.

However, despite its size, Freedom Mortgage’s proprietary computer system would prevent its loan officers from completing clients’ applications if certain information — including on race and ethnicity — was missing. To get around this software limitation, managers at the company told loan officers simply to select “non-Hispanic white” for people who didn’t provide their own ethnicity, a CFPB settlement document reveals.

The CFPB noted in the document that loan officers were told to enter than information “regardless of whether that was accurate.” The agency also mentioned one specific case in which a potential borrower repeatedly said he didn’t want to provide information about his ethnicity, but was nevertheless entered into Freedom Mortgage’s system as white.

These types of errors happened at least 125 times.

In hundreds of other cases, Freedom Mortgage “incorrectly reported applicants as non-Hispanic white even though the applicants provided requested race or ethnicity information other than non-Hispanic white,” the CFPB document states.

Freedom Mortgage loan officers also took it upon themselves to enter information on applicants’ sex even when those applicants opted not to provide it. They did this because without selecting an applicant’s sex, the system wouldn’t save marital status information. Instead, the software would simply delete a co-applicant’s name and income — a situation that obviously affects the type and size of a loan someone can get.

These problems continued from at least 2014 to 2017, according to the CFPB.

Freedom Mortgage did not immediately respond to Inman’s request for comment.

However, the CFPB describes the company’s errors as “intentional” and a violation of the Home Mortgage Disclosure Act, which requires lenders to report demographic information to regulators.

As a result, Freedom Mortgage has to pay the $1.75 million fine, and according to the CFPB “take steps to improve its compliance management to prevent future violations.”

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