Bank of America agreed to pay $12 million to settle allegations that hundreds of its loan officers failed to collect required demographic data from mortgage applicants — specifically, race, ethnicity and sex — but reported to the Consumer Financial Protection Bureau that the applicants had chosen not to respond, the agency said Tuesday.
“Bank of America violated a federal law that thousands of mortgage lenders have routinely followed for decades,” CFPB Director Rohit Chopra said in a statement Tuesday, referring to the Home Mortgage Disclosure Act. “It is illegal to report false information to federal regulators, and we will be taking additional steps to ensure that Bank of America stops breaking the law.”
The bank launched a review of its own HMDA-related data collection practices after it received a customer complaint in 2020, according to the CFPB’s consent order.
Bank of America found that 113 loan officers reported that all of their applicants, between January and March 2020, chose not to provide their race or ethnicity, according to the CFPB. When the bank expanded its review, it found another 290 loan officers who claimed that potential borrowers chose not to provide their race and ethnicity on 100% of the applications taken over a three-month period between 2016 and 2021, the bureau said.
Bill Halldin, a Bank of America spokesperson, said the bank “properly collected demographic data in more than 99% of applications in the years reviewed by the CFPB and consistently had lower percentages of applicants not disclosing their race compared to annual industry averages,” according to a statement emailed to Bloomberg.
The bank did not admit or deny wrongdoing.
"As the CFPB notes, we took additional steps in 2020 and 2021 to enhance our monitoring and training to ensure employees ask applicants for required racial, ethnic and gender information,” Halldin wrote in his statement, also seen by American Banker.
At issue are potential inconsistencies between procedures of applications received through Bank of America’s distributed lending channel and its centralized one. Roughly 75% of BofA’s mortgage applications are taken over the phone, the CFPB reported. Bank of America began recording and monitoring loan officers’ calls at the bank’s centralized channel in 2010, but did not do the same for distributed loan officers until 2021, the bureau found.
Also, the bank in 2013 began monitoring the monthly rate at which distributed loan officers reported that mortgage applicants did not want to provide the demographic data. By 2016, the rate at which officers reported that applicants did not provide the data had fallen to 6%, from 13% three years earlier.
Bank of America halted its monitoring in 2016 and, by 2020, loan officers reported that racial and ethnic information was not provided on 17% of applications in the distributed channel, according to the CFPB.
As part of Tuesday’s settlement, Bank of America must provide training to its loan officers and other employees on how to collect HMDA data. Bank staff must also provide monthly reports to managers and leadership showing the proportion of applications on which the demographic data is not provided, broken down by individual loan officer. Bank of America must also audit phone applications periodically to ensure HMDA data is accurate, according to the CFPB.
HMDA is meant to help regulators determine how well lenders are serving their communities' housing needs and ensure they are not engaged in discriminatory lending.
Bank of America employed more than 4,500 loan officers from 2016 to 2020 and received more than 300,000 mortgage loan applications each year in that time, the CFPB said. About half of those were received through the distributed lending channel.
