CFPB proposes settlement with Freedom Mortgage over HMDA reporting

The Consumer Financial Protection Bureau is proposing to settle its suit against Freedom Mortgage, wherein the watchdog accused the lender and servicer of botching the reporting of Home Mortgage Disclosure Act (HMDA) data.

If a Florida federal court approves, Freedom may have to dish out $3.95 million for submitting alleged error-riddled mortgage loan data and will have to implement procedures and controls to more accurately report said data going forward, the watchdog wrote in a press release Tuesday.

The original complaint, filed last fall, claimed the mortgage loan data submitted by Freedom in 2020 contained widespread errors across multiple data fields, violating HMDA and Regulation C. But also noted the lender violated a 2019 consent order, which accused Freedom of misreporting borrower data from 2014 to 2017.

If the court accepts this agreement, all-in-all, Freedom will have owed the CFPB almost $6 million to settle both cases of inaccurate data reporting. 

"Freedom Mortgage is a repeat offender that has ignored requirements to submit accurate data that help federal regulators maintain a fair home lending market," said CFPB Director Rohit Chopra in a written statement. "The CFPB is making sure that Freedom Mortgage pays for their actions as well as institutes guardrails to prevent future violations." 

Freedom did not immediately respond to a request for comment. 

Apart from potentially paying a penalty and fine tuning its reporting going forward, Freedom would also be required to conduct testing for HMDA data it submitted in the calendar years 2021, 2022 and 2023 and later have this be looked over by an auditor. 

By Dec. 10, 2025 Freedom must provide a report to the "supervision director describing its review, findings, any errors, and root causes for any errors, and including copies of all reports by the HMDA auditor," the proposed settlement filed by the CFPB June 18 said.

Additionally, in the five years following the effective date, Freedom must notify the government watchdog 30 days prior to any development that may affect compliance obligations, this includes the company dissolving, being sold or going bankrupt. 

The lawsuit filed last October originated from Freedom's submission of 2020 HMDA data in February 2021. The CFPB claimed it found 51 data errors in a 159-file sample, prompting Freedom to file a resubmission. The September refiling of 2020 data included revisions to 174,000 data entries, the complaint said.

The private lending and servicing giant, in fighting the charges, has argued the suit should be tossed on the regulator's unconstitutional funding structure. However, in a 7-to-2 decision in May, the U.S. Supreme Court said the CFPB's being funded through the Federal Reserve as part of the Dodd-Frank Act met the test of the appropriations clause.