The Consumer Financial Protection Bureau (CFPB) has imposed a hefty fine of $12 million on Bank of America for misleading mortgage lending data reported to the federal government. The fine comes as a consequence of the bank's violation of the 1975 Home Mortgage Disclosure Act (HMDA), a federal law that mandates accurate reporting of demographic data about mortgage applications to financial regulators.
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False Reporting and Regulatory Violations
According to the CFPB consent order, Bank of America engaged in the unlawful practice of falsely reporting demographic data, including race, ethnicity, and sex, for mortgage applications between 2016 and 2021. The violations initially surfaced in 2020 when the bank identified numerous loan officers who failed to collect this crucial information. Instead, they falsely claimed that applicants declined to provide such details. This breach of the HMDA exposes potentially discriminatory lending practices.
Delayed Action and Monitoring Shortcomings
The violations, dating back to 2013 for phone-based loan applications, continued for years without appropriate action from Bank of America. The CFPB found that the bank failed to monitor phone calls for its distributed loan officers until 2021, allowing the misconduct to persist. This negligence occurred despite the Biden administration's heightened focus on addressing racial discrimination in housing and mortgage lending.
Bill Halldin, a representative for the bank, disputed the timeline but acknowledged the violations spanned three months. He stated that Bank of America collected demographic data accurately in more than 99% of applications during the reviewed years. However, some officers reported a lower rate of applicants declining to disclose their race than industry averages.
Previous Scrutiny and Ongoing Reforms
This isn't the first time Bank of America has faced CFPB penalties. In July, the bank was fined $150 million for alleged misconduct, including charging customers multiple junk fees. The latest $12 million fine will be directed to the CFPB's victims' relief fund.
Despite the controversy, Bank of America remains one of the largest mortgage lenders in the country, having funded $53.7 billion in first mortgage loans in 2021 through its digital application service. The bank, with over 4,500 loan officers, processed an average of over 300,000 mortgage loan applications annually from January 2016 to the present day, as reported by the CFPB.
Bank's Response and Ongoing Compliance Efforts
In response to the fine, Bank of America maintained that it properly collected demographic data in the majority of applications and noted improvements in monitoring and training in 2020 and 2021. The bank clarified that the data collection issue had no impact on the outcome of applications.
CFPB Director Rohit Chopra affirmed the regulatory commitment, stating, “We will be taking additional steps to ensure that Bank of America stops breaking the law.”