Ahead of trial date in HMDA case, Freedom Mortgage and CFPB face hurdles


The Consumer Financial Protection Bureau (CFPB) and Freedom Mortgage were handed minor setbacks by the presiding and magistrate judges, respectively, in a case that the regulator brought in widespread violations in its 2020 submission of Home Mortgage Disclosure Act (HMDA) data. The development was first reported by National Mortgage News.

The original case was filed in the U.S. District Court for the Southern District of Florida, with the CFPB alleging that Freedom submitted its 2020 HMDA data to the bureau in early 2021 with “widespread and significant errors,” according to the CFPB statement in the original complaint reviewed by HousingWire.

When the company resubmitted its data seven months later, the “revised submission that attempted to correct these errors included changes to almost 20% of all Covered Loans, and changes to over 174,000 data entries in dozens of data fields,” the CFPB claims.

The bureau also alleges ongoing HMDA violations that contain “pervasive deficiencies in [the lender’s] policies, procedures and systems to collect and report HMDA data […] despite knowing its systems were faulty, [failing] to implement adequate changes.”

In December 2023, Freedom submitted a motion to dismiss the case under four premises: that the CFPB’s claim is “bare-bones” and vague; that “HMDA and [its implementing] Regulation C are unconstitutionally vague because they do not establish an error rate or accuracy standard that place institutional lenders on notice for when their reporting is subject to enforcement;” that an “obey the law” injunction is unenforceable; and that the funding structure for the CFPB is unconstitutional, which is “fatal to its claims,” as recounted by the judge.

But Judge Donald Middlebrooks declined to dismiss the case, finding on May 2 that grounds for a dismissal were insufficient. Regarding potential unconstitutionality of the agency’s funding structure, Middlebrooks noted that this exact question is currently before the U.S. Supreme Court and declined to take a position until the high court has issued its own determination, which is expected sometime this year.

The case has not been entirely smooth sailing for the CFPB either. On April 5, Magistrate Judge William Matthewman found in favor of Freedom when it requested to compel the CFPB to produce information “relevant to both how the CFPB views the ‘gravity of the violation,’ […] and what sorts of ‘errors’ constitute ‘violations,’” according to the judge.

The CFPB objected, saying that such information would include “data about nonparty supervised entities’ HMDA data submissions” that is “irrelevant, burdensome, and protected ‘by the attorney-client, bank examination, law enforcement, and deliberate process privileges,’” as summarized by Middlebrooks.

Middlebrooks disagreed with the CFPB, however, saying that discovery is based on proportionality and that “the Court finds that other institutions’ errors are relevant to the gravity of [the] defendant’s purported violation.” The judge said that the CFPB failed to establish why such a request would be burdensome and ruled that the information Freedom is seeking is not privileged.

Instead, Freedom “is seeking factual information surrounding the number of changes made between submission and resubmission of HMDA data, and the total number of errors. This information does not implicate attorney-client privilege, or the bank examination, law enforcement, or deliberate process privileges, as it involves a comparison of data,” Middlebrooks ruled.

As of May 10, no party has responded to the order denying the motion to dismiss. The case remains ongoing, with the trial scheduled to commence in July.



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