Johnson v. Freedom Mortgage Corporation

Background

Lea E. Johnson and Samantha J. Johnson obtained a mortgage loan and later entered into an agreement reaffirming the mortgage debt during their Chapter 7 bankruptcy case. The mortgage payment due May 1, 2020, was $1,595.12. Freedom Mortgage’s payment instructions required borrowers to include their loan number with mailed payments.

On April 28, 2020, Samantha Johnson obtained a $1,596 cashier’s check payable to Freedom Mortgage. The check itself did not contain the loan number or other identifying information tying it to the Johnsons’ loan. Freedom Mortgage did not apply the check to the account, treated it as nonconforming, and eventually returned it to the issuing bank. The Johnsons later obtained a new cashier’s check, this time with the loan number on its face. Freedom Mortgage applied that payment to the account on June 9, 2020.

Freedom Mortgage reported the payment as more than 30 days late. Between October 2020 and July 2021, the Johnsons disputed the reporting through the credit-reporting agencies. Freedom Mortgage investigated the disputes and continued to verify that the account had been 30 days late in May 2020.

Claims and motion

The Johnsons alleged that Freedom Mortgage violated the Fair Credit Reporting Act by providing inaccurate information to credit-reporting agencies and failing to conduct a reasonable reinvestigation after receiving notice of their disputes. Freedom Mortgage moved for summary judgment, arguing that its reporting was accurate and that it conducted reasonable investigations.

Summary judgment is appropriate when the evidence shows no genuine dispute over a fact that could affect the result and the moving party is entitled to judgment under the law.

Court’s reasoning

The court held that the Johnsons could not prevail on their claim without showing that the challenged credit information was inaccurate. The undisputed facts showed that Freedom Mortgage did not credit the first check to the Johnsons’ account, returned it, and credited the later check on June 9, 2020. The court concluded that reporting the payment as late was accurate.

The court rejected the Johnsons’ argument that mailing the first check on time made the reporting inaccurate. It reasoned that the first check lacked the required loan number, Freedom Mortgage had imposed a legally permitted payment-identification requirement, and the payment was not credited until after the due date. The court also found that any dispute about whether the Johnsons included a separate piece of paper with account information was not material because it did not change whether the reporting was accurate.

The court further rejected arguments that the Fair Credit Reporting Act required “maximum possible accuracy” for a mortgage company furnishing information, or that technically accurate reporting was nevertheless misleading on these facts. It also found the Johnsons’ reliance on another case unpersuasive because that case involved a different and more disputed factual record.

Because the court ruled for Freedom Mortgage on the accuracy issue, it did not address the separate question of whether Freedom Mortgage’s investigations were reasonable.

Disposition

The court granted Freedom Mortgage’s Motion for Summary Judgment and dismissed the case with prejudice. It directed that judgment be entered accordingly.