Tag Archives: cfpb audit

CFPB Orders Connecticut Lender to Pay $83,000 Civil Penalty

Pay Fine

Connecticut Lender to Pay $83,000

(Consumer Financial Protection Bureau – Washington, D.C.) Today, the Consumer Financial Protection Bureau ordered a Connecticut mortgage lender, 1st Alliance Lending, LLC (First Alliance), to pay an $83,000 civil money penalty for violating federal law by illegally splitting real estate settlement fees. First Alliance self-reported these violations to the Bureau, admitted liability, and provided information related to the conduct of other actors that has facilitated other enforcement investigations.

“These types of illegal payments can harm consumers by driving up the costs of mortgage settlements,” said CFPB Director Richard Cordray. “The Bureau will use its enforcement authority to ensure that these types of practices are halted. We will, however, also continue to take into account the self-reporting and cooperation of companies in determining how to resolve such matters.”

First Alliance is a mortgage lender in East Hartford, Conn. that focuses primarily on providing loss-mitigation financing to distressed borrowers. First Alliance obtains troubled mortgages from mortgage servicers, and reaches out to consumers to offer them new loans with reduced principal amounts under federally related mortgage programs.

First Alliance started using a hedge fund to finance its loans in 2010. Under this arrangement, First Alliance split revenues and fees with affiliates of the hedge fund. In 2011, First Alliance secured less costly financing and ended its arrangement with the hedge fund and its affiliates. Although the hedge fund and its affiliates no longer financed First Alliance’s mortgages, First Alliance continued to split origination and loss-mitigation fees with them. The hedge-fund affiliates received payments from 83 First Alliance loans made between August 2011 and April 2012.

In 2013, First Alliance reported to the Bureau that it believed it had violated the Real Estate Settlement Procedures Act (RESPA) by paying these unearned fees. RESPA bans a person from paying or receiving a portion or split of a fee that has not been earned in connection with a real estate settlement. First Alliance cooperated with the Bureau’s investigation, and the Bureau concluded that First Alliance’s payments to the hedge fund and its affiliates had violated RESPA. First Alliance’s self-reporting and cooperation, consistent with the Bureau’s Responsible Business Conduct bulletin published on June 25, 2013, were taken into account in resolving this matter.

Under the terms of today’s consent order, First Alliance is required to pay a civil money penalty of $83,000 to the Bureau and agrees not to violate RESPA in the future. The Bureau will continue to enforce RESPA’s provisions to protect consumers and to deter unlawful activity.

A copy of the Bureau’s consent order is available here: http://files.consumerfinance.gov/f/201402_cfpb_consent-order_first-alliance.pdf

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 For more information about OnlineEd and their pre-license and continuing education for real estate and mortgage brokers, please visit www.OnlineEd.com. For more information about mortgage-specific products for compliance training, tracking, and management, please visit  https://www.onlineed.com/inlineed.php or contact Joseph Mikkelson at 1.866.519.9597.

This article was published on February 25, 2014. 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.

CFPB Releases Exam Procedures for New Mortgage Rules

(CFPB – WASHINGTON, D.C.) — On June 4, 2013, The Consumer Financial Protection Bureau (CFPB) published the first update to its exam procedures for the new mortgage regulations it issued in January 2013. The exam procedures offer financial institutions and mortgage companies valuable guidance on what the CFPB will be looking for as the rules become effective. The new regulations include those on appraisals, escrow accounts, and compensation and qualifications for loan originators.

“The CFPB recognizes that the easier we make it for financial institutions and mortgage companies to follow the new regulations, the better off consumers will be,” said CFPB Director Richard Cordray. “By releasing details of what our examiners will be looking for well in advance of the effective date of most of the rules, we are giving industry more time to adjust.” Consumer Financial Protection Bureau logo

In January, the CFPB issued numerous new regulations reforming the mortgage market, many of which were directed by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. The rules cover many stages of a consumer’s mortgage experience, from shopping for a loan to paying it off. Most of the CFPB’s new rules go into effect in January 2014.

Today’s release of exam procedures will help financial institutions and mortgage companies understand how they will be examined for CFPB rules that:

  • Set qualification and screening standards for loan originators: A loan originator must be ethical and knowledgeable. They will need to: meet character, fitness, and financial responsibility requirements; pass criminal background checks; and complete appropriate training.
  • Prohibit steering incentives: Compensation for a loan originator generally cannot vary with the loan terms. A broker or loan officer cannot get paid more if the consumer takes a loan with a higher interest rate, a prepayment penalty, or higher fees.
  • Prohibit “dual compensation:” A loan originator cannot get paid by both the consumer and another person such as the creditor.
  • Protect borrowers of higher-priced mortgage loans: The required duration of an escrow account on higher-priced mortgage loans extends from a minimum of one year to a minimum of five years.
  • Prohibit the waiver of consumer rights: It is prohibited to bar consumers in their mortgage or home equity loan or related agreements from bringing a claim in court in connection with any alleged violation of federal law.
  • Prohibit mandatory arbitration: Mandatory arbitration of disputes related to mortgage loans is generally prohibited for mortgage and home equity loans.
  • Require lenders provide appraisal reports and valuations: Mortgage lenders will need to provide applicants with free copies of all appraisals and other written valuations developed in connection with certain mortgage loan applications.
  • Prohibit single premium credit insurance: Creditors will be prohibited from financing certain credit insurance premiums in connection with certain mortgage loans.

The CFPB is sharing with industry what it will be looking for in its examinations under the new rules by updating the applicable sections of the exam procedure manuals for two laws – the Truth in Lending Act (TILA) and the Equal Credit Opportunity Act (ECOA). These documents are intended for use by CFPB examiners and the financial institutions and mortgage companies subject to the new regulations. They are the first round of updates for what will likely be multiple updates.

The CFPB is committed to the mortgage industry’s compliance with the new consumer protections. Throughout 2013, the CFPB has been working for a smooth transition. It has published plain-language guides. It plans to educate the public about their protections under the new rules. And it plans to publish additional interim examination procedures. Within the next several months, the CFPB will publish its first round of exam procedures for the Ability-to-Repay and mortgage servicing rules.

The CFPB is coordinating with other federal government regulators that also conduct examinations of mortgage companies and financial institutions to ensure all regulators have a shared understanding of the CFPB’s new rules. This multi-agency effort includes the interagency development of exam procedures. For example, the TILA procedures released today are based on the approved Federal Financial Institutions Examination Council procedures. This interagency effort helps promote a consistent regulatory experience for industry.

OnlineEd SM LogoThe Interim TILA Examination Procedures can be found at: http://files.consumerfinance.gov/f/201306_cfpb_laws-and-regulations_tila-combined-june-2013.pdf

OnlineEd SM LogoThe Interim ECOA Examination Procedures can be found at: http://files.consumerfinance.gov/f/201306_cfpb_laws-and-regulations_ecoa-combined-june-2013.pdf

 

Once these and other exam procedures have been updated with the new mortgage rule requirements, the CFPB will incorporate all amended sections, including the TILA and ECOA sections, into its general supervision and examination manual.

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The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov. For more information about OnlineEd® please visit www.onlineed.com. For more information about the OnlineEd®  mortgage industry compliance management and education solution, InlineEd,  please visit www.inlineed.com.

Get Compliant – And How to Stay that Way!

Check compliance off your list!

Compliance is a hot topic today, as the landscape is constantly shifting and being redefined as the mortgage and real estate industry stabilizes in the wake of the financial crisis. Understanding what these new and changing compliance requirements are can be a headache, but OnlineEd.com has a few tips that can help you be prepared in the event of a CFPB audit.

In January 2013, the CFPB finalized new requirements to the HOEPA rule, ECOA valuations rule, and the TILA high-priced mortgage appraisal rule, changes which will be effective January of next year. Over the past couple of years, many similar changes have been made and are currently enforced, and this can make compliance a nightmare to those caught unprepared.

These deadlines can seem like a daunting prospect, producing stress as many companies sprint towards the finish line. However, it can be dangerous to look at compliance deadlines as a finish line or as a summit. Many requirements, such as FinCEN’s AML compliance requirement, stipulate ongoing education and annual completion of compliance by all relevant staff. The danger of this “finish-line” view of compliance deadlines is fairly straight-forward; just because you were compliant on time once, doesn’t necessarily mean that you will be compliant 18 months later when the CFPB or state agencies come knocking with an audit. New employees, staffing changes and promotions, and changes in requirements can all impact your company’s compliance down the road.

Luckily, preparing for a potential audit doesn’t have to be hard. The CFPB is very good at publishing guides well ahead of time, such as this guide to the new HOEPA rule, to assist companies looking to get in line with their requirements. There are also services that can make the whole process a breeze if you don’t have the time or means to develop your own dedicated compliance program. Find out more about what these services can do for you here.

The key is to act preemptively, and to make sure that you have a plan in place to be covered in the future.

“Being reactive in compliance is always much more expensive and painful than being proactive,” said Michael Waldron, a partner at the law firm Ballard Spahr.

In the spirit of being proactive, here are a few best practices to help you get the ball rolling on becoming compliant:

  • Stop thinking of compliance as a “one-and-done” type of situation. Make sure that you have a system in place to ensure you’ll be just as compliant in 18 months as you are today.
  • Don’t procrastinate or cross your fingers and hope you don’t get an audit. The CFPB has said that they are looking to audit everyone, so don’t be caught with your head in the sand!
  • Make sure that you are not only compliant, but that you can demonstrate it with thorough documentation and records-keeping, whether with an internal system or through a third party like InlineEd.

 

Hopefully this helps you and your company in your efforts to stay on the right side of the CFPB. Until next time, thank you for reading!

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If you have questions or would like to learn more about OnlineEd®, please visit www.OnlineEd.com. If you would like information about OnlineEd’s® Compliance Management System solution developed for the mortgage industry, please visit www.InlineEd.com or telephone (866) 519-9597.

This article was published on May 8, 2013.  All information contained in this posting is correct and current as of this date.  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 if cited, should be verified before use by the user.