CFPB Takes Action Against Banks and NonBanks for Inaccurate Mortgage Loan Reporting

(CFBP – Washington, D.C.) –  Today the Consumer Financial Protection Bureau (CFPB) ordered Mortgage Master, Inc. and Washington Federal to pay civil penalties for violating the Home Mortgage Disclosure Act (HMDA), which requires certain mortgage lenders to accurately collect and report data about home mortgage loans. Mortgage Master will pay $425,000 and Washington Federal will pay $34,000 in civil penalties. The CFPB is also releasing a bulletin today that puts mortgage lenders on notice about the importance of submitting correct mortgage loan information under HMDA.

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“When financial institutions report inaccurate information, it obstructs the purpose of the Home Mortgage Disclosure Act and makes it more difficult for the CFPB to discover and stop discriminatory lending,” said CFPB Director Richard Cordray. “Today we are sending a strong signal that no mortgage lending institution – whether bank or nonbank – should be able to mislead the public with erroneous data.”

In 1975, Congress passed the Home Mortgage Disclosure Act requiring certain mortgage lenders to make loan information available to the public. Banks, savings associations, credit unions, and mortgage companies must disclose information about home mortgage loan applications, including information about the applications they reject. The Dodd-Frank Wall Street Reform and Consumer Protection Act transferred HMDA rulemaking authority to the CFPB and made the CFPB a HMDA enforcement agency.

Inaccurate HMDA data impedes the Bureau’s efforts to detect violations of the Equal Credit Opportunity Act (ECOA) and to stop discrimination in home mortgage lending. Federal prudential regulators, enforcement agencies, community organizations, and state and local agencies also rely on accurate HMDA data to evaluate a financial institution’s compliance with ECOA and other laws, such as the Fair Housing Act and the Community Reinvestment Act. Enforcing HMDA ensures that lenders that engage in discriminatory lending or that fail to meet the credit needs of the entire community, including low- and moderate-income neighborhoods, cannot hinder regulatory efforts by collecting and submitting erroneous data.

The Bureau reviews the accuracy of HMDA data and assesses compliance programs as part of its supervision of both banks and nonbanks. To date, the Bureau has conducted HMDA reviews at dozens of mortgage lenders, both bank and nonbank, and has found that many lenders have adequate HMDA compliance systems, resulting in HMDA data with no errors or very few errors. In its HMDA reviews conducted at Mortgage Master and Washington Federal, however, the CFPB found that their compliance systems were inadequate and that they had severely compromised mortgage lending data.

Mortgage Master: According to the CFPB’s Consent Order, a CFPB exam found that Mortgage Master, a nonbank headquartered in Walpole, Mass., had significant data errors in the 21,015 mortgage loan applications it reported for 2011. The Bureau collaborated closely in its subsequent investigation with the Commonwealth of Massachusetts Division of Banks, which had also identified significant error rates in Mortgage Master’s HMDA filings. The CFPB’s Consent Order is concurrent with a Consent Order from the Commonwealth of Massachusetts Division of Banks. The CFPB is requiring Mortgage Master to:

  • Pay a civil penalty of $425,000;
  • Correct and resubmit its 2011 HMDA data; and
  • Develop and implement an effective HMDA compliance management system to prevent future violations.

Washington Federal: According to the CFPB’s Consent Order, a CFPB exam found that Washington Federal, a bank headquartered in Seattle, Wash., had significant errors in the 5,785 mortgage loan applications it reported for 2011. The CFPB is requiring Washington Federal to:

  • Pay a civil penalty of $34,000;
  • Correct and resubmit its 2011 HMDA data; and
  • Develop and implement an effective HMDA compliance management system to prevent future violations.

Since the CFPB’s discovery of the inaccuracies, both entities have been taking steps to improve their HMDA compliance management systems and the accuracy of their HMDA mortgage loan information.

The Mortgage Master Consent Order can be found at: http://files.consumerfinance.gov/f/201310_cfpb_consent-order_mortgage-master.pdf

The Washington Federal Consent Order can be found at: http://files.consumerfinance.gov/f/201310_cfpb_consent-order_washington-federal.pdf

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For more information about OnlineEd, their HMDA training program and compliance management system, please visit www.InlineEd.com or contact Joseph Mikkelson at 1.866.519.9597.

This article was published on October 9, 2013. All information contained in this posting is deemed correct and current as of this date, but is not guaranteed by the author. Due to the fluid nature of the subject matter, regulations, requirements, laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

Jeff Sorg

About the Author

Jeff Sorg is a co-founder of OnlineEd®, a Web-based vocational school founded in 1997 where he also serves as Corporate Secretary, Chief Operating Officer, and School Director. Sorg holds vocational instructor licenses in Oregon, Washington, California, and Nevada and has authored numerous pre-licensing and continuing education courses. Sorg was awarded the International Distance Education Certification Center's CDEi Designation for distance education in 2008. OnlineEd® provides real estate, mortgage broker, insurance, and contractor pre-license, post-license, continuing education, career enhancement, and professional development and designation courses over the Internet.