Tag Archives: compliance management

Realty Firm to Pay $500,000 for Disclosure Violations Suggesting Buyers Use a Specific Title/Closing Company

(Jeff Sorg, OnlineEd)  The Consumer Financial Protection Bureau (CFPB) recently ordered RealtySouth, the largest real estate firm in Alabama, to pay $500,000 for inadequate disclosures that could leave consumers unaware of their rights to choose service providers during the home-buying process. The practices identified by the CFPB’s investigation illegally benefited TitleSouth LLC, an affiliated company owned by the same holding company that owns RealtySouth.

“Disclosures give consumers the power to make informed financial decisions, and buying a house is among the biggest financial decisions most people ever make,” said CFPB Director Richard Cordray. “The Consumer Bureau will continue to take action against companies that attempt to modify disclosures and keep consumers in the dark.”

The Bureau charged that RealtySouth violated Section 8 of the Real Estate Settlement and Practices Act (RESPA), which protects consumers during the home-buying process by prohibiting kickbacks, payment of unearned fees and items of value for referrals of real estate settlement services.  RealtySouth’s preprinted form purchase contracts, which its agents provided to homebuyers preparing to make an offer on a home, either explicitly directed or otherwise suggested that title and closing services be conducted by a specific, affiliated title company.

While RESPA allows real estate companies to refer their customers to affiliated businesses, the law requires them to provide consumers an “Affiliated Business Arrangement” (ABA) disclosure that clearly states their right to shop around for a better price and that they are not required to use the affiliated company. The disclosure RealtySouth gave consumers did not comply with the law; it did not properly highlight consumers’ rights, and the required language was buried in a section of text that also made marketing claims about the company’s prices.

RealtySouth changed its disclosure forms immediately after being contacted by the CFPB, but under the terms of the consent order, RealtySouth will pay a civil penalty of $500,000, ensure that its disclosures comply with RESPA, and ensure that its training materials emphasize that its agents cannot require the use of affiliates.

A copy of the Bureau’s consent order is available here: http://files.consumerfinance.gov/f/201405_cfpb_consent-order_realty-south-and-title-south.pdf

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This article was upadted on September 19, 2014. All information contained in this posting is deemed correct and current as of this date, but is not guaranteed by the author and may have been obtained by third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and 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.

For more information about OnlineEd and their education for real estate and mortgage brokers, visit www.OnlineEd.com.

CFPB Report Shows Complaints Rose 80 Percent in 2013

(WASHINGTON, D.C. – CFPB) — The Consumer Financial Protection Bureau (CFPB) recently announced that consumer complaint volume nearly doubled from 91,000 complaints received in 2012 to 163,700 complaints received in 2013. The CFPB’s Consumer Response Annual Report also highlighted the many issues the CFPB is helping consumers address – from foreclosure alternatives to simply receiving better customer service.

“Consumer complaints have become central to the work of this agency. They enable us to listen to, and amplify, the concerns of any American who wants to be heard,” said CFPB Director Richard Cordray. “They are also our compass. They make a difference by informing our work and helping us identify and prioritize problems for potential action.”

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Report reveals the most complained about product is mortgages

The 2013 Consumer Response Annual Report can be found at: http://www.consumerfinance.gov/reports/2013-consumer-response-annual-report/

The Dodd-Frank Wall Street Reform and Consumer Protection Act, which created the CFPB, established the handling of consumer complaints as an integral part of the CFPB’s work. When the Bureau opened its doors on July 21, 2011, it began consumer response operations the same day, accepting consumer complaints about credit cards. Since then, the Bureau has expanded its complaint handling in 2012 to include complaints about mortgages, bank accounts and services, private student loans, vehicle and other consumer loans, and credit reporting. In 2013, it began taking complaints on money transfers, debt collection, and payday loans.

Today’s report covers the 163,700 complaints received by the CFPB from Jan. 1, 2013 through Dec. 31, 2013. This is an 80 percent increase over the previous year’s 91,000 complaints. To date, including this year, the CFPB has received more than 310,000 complaints overall. According to the report, the top three complaints in 2013 by consumers were:

Mortgages: The number one most complained about consumer product was mortgages, accounting for 37 percent of overall complaints. For these approximately 60,000 complaints, consumers were most concerned with problems when they were unable to pay, such as issues relating to loan modifications, collections, or foreclosures.

Debt collection: Debt collection was the second most complained about category, accounting for 19 percent of overall complaints even though the Bureau did not begin accepting debt collection complaints until July 2013. For the approximately 31,000 debt collection complaints, consumers were most concerned with collectors attempting to collect debt not owed, communication tactics by the collectors, and collectors taking or threatening illegal action.

Credit reporting: The number three most complained about category was credit reporting, accounting for about 15 percent of overall complaints. For the approximately 24,000 complaints about credit reporting, nearly three out of four consumers were concerned with incorrect information on their credit report.

The Bureau expects companies to respond to complaints within 15 days and to describe the steps they have taken or plan to take. The CFPB expects companies to close all but the most complicated complaints within 60 days. Companies have responded to more than 93 percent of the complaints sent to them for response, and consumers have disputed only 21 percent of those company responses.

Sometimes, companies respond through non-monetary relief. About 11 percent of complaints fall into this category; for credit reporting complaints, companies respond to about one out of three complaints this way. Through the CFPB’s complaint process, consumers have received a range of non-monetary relief in response to their complaints, such as:

Foreclosure alternatives: Consumers have received mortgage foreclosure alternatives that help them keep their home;
Protection from debt collectors: After CFPB inquiries, debt collectors have stopped engaging in excessive collection communications with consumers;
Restored lines of credit: Consumers have had their credit lines restored when they wanted, or removed when that was their desired outcome;
Corrections to credit reports: Consumers have had their credit reports cleaned up either by having correct submissions given to credit bureaus or by having credit bureaus correct inaccurate information about their consumer accounts; and
Customer service: Many consumer problems are related to unanswered inquiries or incorrect information. After CFPB involvement, many customers had their formerly unmet customer service issues finally resolved.

The Bureau has also seen monetary relief for consumers in about 7 percent of complaints. This includes:

A median amount of $460 for mortgages;
A median amount of $126 for credit cards; and
A median amount of $111 for bank accounts or services.

Information about consumer complaints is available to the public through the CFPB’s public Consumer Complaint Database. A complaint is listed in the database after the company responds to the complaint or after the company has had the complaint for 15 calendar days, whichever comes first. If a company demonstrates within 15 days that it has been wrongly identified, no data for that complaint is posted. The database is updated nightly and includes anonymized complaint information. The database enables the public to see what is being complained about and why; and it enables consumer groups to identify troublesome trends.

Complaints inform the Bureau’s work and help to identify problems, which then feed into the Bureau’s supervision and enforcement prioritization process.

The Bureau will continue to work toward expanding its complaint handling capabilities to include other products and services under its authority, such as prepaid cards.

To submit a complaint, consumers can:

Go online at www.consumerfinance.gov/complaint
Call the toll-free phone number at 1-855-411-CFPB (2372) or TTY/TDD phone number at 1-855-729-CFPB (2372)
Fax the CFPB at 1-855-237-2392
Mail a letter to: Consumer Financial Protection Bureau, P.O. Box 4503, Iowa City, Iowa 52244
Additionally, through “Ask CFPB,” consumers can get clear, unbiased answers to their questions at consumerfinance.gov/askcfpb or by calling 1-855-411-CFPB (2372).

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.

Oregon Amends Provisions of Foreclosure Avoidance Notice

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Oregon amends Foreclosure Avoidance Measure Notice

(Jeff Sorg, OnlineEd – Portland, OR) Oregon has amended the provisions of its Foreclosure Avoidance Notice by providing for the form and content of the notice when a lender determines that a homeowner is not eligible for foreclosure avoidance measures or has not complied with an already agreed upon avoidance measure.

The form [Form 20] requires the lender to include homeowner name, lender name, and the subject property address. The lender will then check an appropriate box on the form indicating either that the homeowner is not eligible for any foreclosure avoidance measure or that the homeowner is not in compliance with the terms of an agreement already reached with the lender. The lender must describe with specificity and in plain language their basis for their determination. The form also notifies the homeowner of the date and location set for the sale of the property, cautions the homeowner to seek legal advice, and provides information about agencies and organizations to assist the homeowner.

View  or download a copy of this form.

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For more information about OnlineEd’s mortgage and real estate broker education visit www.OnlineEd.com. For more information about mortgage-specific learning management systems and products for compliance training, tracking, and management visit  https://www.onlineed.com/inlineed.php or contact Joseph Mikkelson at 1.866.519.9597.

This article was published on February 12, 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 Seeks Constent Order Against Castle & Cooke for $13 Million

(CFPB – WASHINGTON, D.C.)  The Consumer Financial Protection Bureau (CFPB) today announced a proposed consent order in its enforcement action against Castle & Cooke Mortgage, LLC, for allegedly steering consumers into costlier mortgages. The Bureau has asked a federal district court to approve a consent order that would provide more than $9 million in restitution for consumers and obtain $4 million in civil money penalties against Castle & Cooke and two of its officers for allegedly paying loan officers illegal bonuses.

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Mortgage Loan Originators were allegedly paid illegal bonuses for steering consumers into mortgages with higher interest rates.

“Our action has put an end to illegal steering of consumers and has put more than $9 million back in their pockets,” said CFPB Director Richard Cordray. “This outcome embodies our mission—to root out bad practices from the marketplace and ensure consumers are being treated fairly.”

Castle & Cooke is a  Utah-based mortgage company that originated about $1.3 billion in loans in 2012. The company maintains 45 branches and does business in 22 states, including Arizona, California, Colorado, Florida, Hawaii, Iowa, Idaho, Nebraska, New Mexico, Nevada, Texas, and Utah. On July 23, 2013, the CFPB filed a complaint in federal district court against the mortgage company and two of its officers for allegedly paying illegal bonuses to loan officers who steered consumers into mortgages with higher interest rates.

The complaint alleged that Castle & Cooke, through actions taken by its president, Matthew A. Pineda, and senior vice-president of capital markets, Buck L. Hawkins, violated the Federal Reserve Board’s Loan Originator Compensation Rule by paying loan officers quarterly bonuses that varied based on the interest rate of the loans they offered to borrowers. That rule banned compensation based on loan terms such as the interest rate of the loan. The rule had a mandatory compliance date of April 6, 2011, and authority over that rule transferred to the CFPB on July 21, 2011. The CFPB estimates that more than 1,100 quarterly bonuses were paid to over 215 Castle & Cooke loan officers.

Enforcement Action

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to take action against institutions for violations of federal consumer financial protection laws. To ensure that all impacted consumers are repaid and that consumers are no longer subject to these illegal practices, the defendants have agreed to:

  • End unlawful compensation practices: Castle & Cooke must end compensation practices, such as giving loan officers bonuses that vary based on the interest rate of the loans they offered to consumers, that violate the Loan Originator Compensation Rule.
  • Pay $9,232,896 toward consumer redress: The defendants will pay $9,232,896 to administer redress to consumers for their actions. Any borrower who has obtained a home loan from a Castle & Cooke loan officer since April 6, 2011, and whose loan officer received a quarterly bonus from Castle & Cooke for that loan, will receive a check as a result of today’s action. The Bureau estimates that more than 9,400 consumers will receive checks.
  • Pay a $4 million civil money penalty: The defendants – Castle & Cooke, Pineda, and Hawkins – will pay $4 million to the CFPB’s Civil Penalty Fund for their alleged violations.
  • Ensure that Castle & Cooke retain records of compensation: Castle & Cooke will abide by federal law that requires creditors to retain evidence of compliance, such as payroll records.

This case was originally referred to the CFPB by investigators with the Utah Department of Commerce, Division of Real Estate. The complaint was filed in the United States District Court for the District of Utah, where the company is located and where the individual defendants reside.

A copy of the proposed consent order, which will not be final until approved by the court, can be found at:http://files.consumerfinance.gov/f/201311_cfpb_proposed-final-order_castle-cooke.pdf

A copy of the complaint filed in July can be found at: http://www.consumerfinance.gov/f/201307_cfpb_complaint_Castle-and-Cooke-Complaint.pdf

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For more information about OnlineEd, their mortgage loan originator compliance training program and education compliance management system, please visit www.InlineEd.comwww.onlineed.com,  or contact Joseph Mikkelson at 1.866.519.9597.

This article was published on November 7, 2013. All information contained in this posting is deemed correct and current as of this date, but is not guaranteed by the author and was obtained by third party sources. 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.

In Wake of Audits CFPB Issues HMDA Bulletin to Put Banking Industry on Notice

(OnlineEd – Portland, OR) – To date, the CFPB has conducted HMDA (Home Mortgage Disclosure Act) reviews at dozens of mortgage lenders, both bank and nonbank. In the wake of these audits, the Bureau has issued an industry wide bulletin to help banks and nonbanks realize the importance of accurate reporting, effective HMDA compliance management systems and adequate employee training.


cfpb bulletinA copy of the bulletin can be viewed by clicking the Resources tab at www.InlineEd.com and then scrolling down to October 9, 2013 CFPB Bulletin on HMDA Compliance Management.

The Bureau reviews the accuracy of HMDA data and assesses compliance programs as part of its supervision of both banks and nonbanks.

The bulletin also announces the release of the CFPB’s HMDA Resubmission Schedule and Guidelines, which lists the error thresholds that CFPB examination teams will use to determine when institutions should correct and resubmit their HMDA data. The CFPB’s new HMDA Resubmission Schedule and Guidelines apply to HMDA reviews that begin on or after Jan. 18, 2014.

By issuing this bulletin today, the Bureau is putting the industry on notice about the integrity of mortgage information. Specifically, the bulletin:

  • Discusses components of an effective HMDA compliance management system. The bulletin suggests common elements of an effective compliance system, which include employee training, internal audits to test and evaluate information accuracy, and assigning responsibility for timely and accurate reporting of the data.
  •  Details factors the CFPB may consider when evaluating whether to pursue a public enforcement action for HMDA violations. The CFPB may consider various factors when determining whether to pursue a public enforcement action, including: the size of the bank or nonbank’s mortgage lending activity; the error rate; the history of previous HMDA supervisory activity, including the history of any violations; and whether the institution self-identified or self-corrected any errors. These factors, along with those listed in the Dodd-Frank Act, will be considered when determining the appropriate size of any civil penalty that the Bureau seeks.

A copy of the bulletin can be viewed by clicking the Resources tab at www.InlineEd.com and then scrolling down to October 9, 2013 CFPB Bulletinon HMDA Compliance Management.

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For more about OnlineEd and HMDA training visit www.OnlineEd.com or www.InlineEd.com or call Joseph Mikkelson at 1.866.519.9597.  For more about the CFPB, please visit their web site http://www.consumerfinance.gov/

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.

Off-the-Shelf Mortgage Industry Policies and Procedures Templates Provide Affordable Solution

(OnlineEd – Portland, OR) – Mortgage education provider OnlineEd has developed industry standard policies and procedures templates to help mortgage companies comply with the Consumer Financial Protection Bureau (CFPB) requirement for mortgage companies to have written policies and procedures in place and reviewed by all of their employees. Their easy-to-use system allows for subscribers to upload their existing policies and procedures, to edit and personalize OnlineEd’s off-the-shelf templates, and also allows for integration of existing policies with the OnlineEd templates.  The system, which is part of OnlineEd’s cloud-based software service known as InlineEd, also allows managers to push out their policies and procedures through email notification to all employees, and records each employee’s acknowledgement that they read and understood the policies.  The InlineEd system allows for customization of such features as branding with company specific information and a company logo, built-in version control, and compliance reports.

“Developing and writing policies and procedures is costly and time consuming. It became evident that there was a real need to help mortgage companies sort out CFPB requirements and then come up with an affordable solution, especially for those companies who might not have a full-time compliance officer on staff”, said OnlineEd Chief Operating Officer Jeff Sorg.

InlineEd provides policies and procedures templates, education and compliance management tracking

Three templates are offered, each rigorously reviewed by industry professionals:

The templates can be purchased as a standalone product or bundled with OnlineEd’s InlineEd Learning Management System (LMS), which includes courses designed to meet CFPB core compliance training for employees and mortgage loan originators. InlineEd also provides the solution for being able to demonstrate to the CFPB that the company has a training program in place to educate their employees on consumer risk-reducing issues.

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For more information please visit www.InlineEd.com or contact Joseph Mikkelson at 1.866.519.9597.

This article was published on September 6, 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.

CFPB Report Finds Many Nonbanks Lack Robust Compliance Systems

(CFPB – WASHINGTON, D.C.) — Today the Consumer Financial Protection Bureau (CFPB) issued a report detailing mortgage servicing problems at banks and nonbanks. The report also found that many nonbanks lack robust systems for ensuring they are following federal laws.

“Our examinations of banks and nonbanks allow us to correct problems before more consumers are affected,” said CFPB Director Richard Cordray. “Today’s report highlights both the mortgage servicing problems throughout the industry and the challenges of making sure that nonbanks are following federal law. Fixing both is a priority for us.”

The Supervisory Highlights report is available at: http://files.consumerfinance.gov/f/201308_cfpb_supervisory-highlights_august.pdf

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), the CFPB supervises depository institutions and credit unions with total assets of more than $10 billion, and their affiliates. The Bureau also has authority to supervise nonbanks regardless of size in certain specific markets: payday lenders; private education lenders; and mortgage companies including originators, brokers, and servicers. For other nonbank markets for consumer financial products or services, the CFPB has the authority to supervise “larger participants.” As directed by Dodd-Frank, the Bureau must define such larger participants by rule. To date, the Bureau has issued rules for the debt collection and credit reporting markets.

Today’s report is part of a series of supervision reports that the CFPB issues regularly. It highlights examination work completed between November 2012 and June 2013.

Mortgage Servicing Problems

Since the CFPB launched its supervision program, it has focused much of its work on mortgage servicing. Mortgage servicers are responsible for collecting payments from mortgage borrowers on behalf of loan owners. They also typically handle customer service, escrow accounts, collections, loan modifications, and foreclosures. In supervising both bank and nonbank servicers, CFPB examiners have uncovered problems that can be harmful to consumers. These include:

 

  • Sloppy account transfers: The rights to manage a loan are frequently bought and sold among servicers. With these transfers among institutions, the CFPB discovered several risks that can cause consumers to miss payments, delay important processes, or affect the good standing of a mortgage borrower’s loan. For example, examiners found:

o   Disorganized and unlabeled paperwork, including important loss mitigation documents;

o   Failures by mortgage servicers to tell consumers when the servicing of the loan is transferred to another company; and

o   A lack of protocols related to the handling of key documents, such as trial modification agreements.

  •  Poor payment processing: Servicers are responsible for processing loan payments and handling tax and insurance payments through escrow accounts. If they do not perform their duties correctly, it can result in extra costs and hassles for the consumer. In its exams, the CFPB found:

o   Inadequate notice to borrowers of a change in address to send payments, resulting in late payments;

o   Excessive delays in handling the cancellation of private mortgage insurance payments, resulting in late fees; and

o   Property taxes being paid later than expected, resulting in borrowers’ inability to claim a tax deduction for the year they planned.

  • Loss mitigation mistakes: Servicers are also responsible for helping qualified struggling borrowers with alternative plans for repayments, if such plans are available. So when servicers fall short of their responsibilities, consumers can be sent to foreclosure unnecessarily. CFPB examiners discovered several problems, including:

o   Inconsistent communications with borrowers, giving them conflicting instructions for loss mitigation processes;

o   Inconsistent loss mitigation underwriting, waiving certain fees and interest charges for some borrowers but not others;

o   Long application review periods, making the loss mitigation process especially hard on consumers whose accounts are also dual-tracked for foreclosure;

o   Incomplete loan files, making it challenging for consumers to find out about their loan modification applications when they call the servicer for help;

o   Poor procedures for requesting missing or incomplete information from consumers, making it difficult for consumers to provide the correct documentation; and

o   Deceptive communications to borrowers about the status of loan modification applications, leading some consumers to faster foreclosure.

 In all cases where the CFPB found mortgage servicing problems, examiners alerted the company to its concerns, specified necessary remedial measures, and, when appropriate, opened CFPB investigations for potential enforcement actions. CFPB’s corrective measures included making sure that important papers were filed appropriately, that servicers improved their policies and procedures governing the handling of loans in loss mitigation, and that consumers were treated according to the law.

The CFPB has also directed servicers to engage in specific corrective actions appropriate to the circumstances, such as: reviewing loss mitigation decisions and related fees or charges to borrowers to determine whether any reimbursement was appropriate; conducting periodic testing to monitor areas of concern; and providing reports to the CFPB on their progress completing the corrective actions.

Many Nonbanks Lack Compliance Management Systems

what you need to know The CFPB expects the companies it supervises – regardless of size – to have fully developed compliance management systems to ensure all federal consumer financial protection laws are followed. A good system ensures that employees know about their responsibilities, creates structures for reviewing operations, and takes corrective actions when needed. A good system also lessens consumer risks and reduces the potential for violations.

Prior to the CFPB’s existence, many supervised nonbanks had not been subject to federal or even state examinations. Perhaps because of this, CFPB examiners found that many nonbanks are more likely to lack robust compliance management systems. The Bureau found that many nonbank institutions are:

  • Missing a comprehensive consumer compliance program: The CFPB found that often individual branches of a business were looking out for relevant federal laws without an overarching system in place at the company. This creates a lack of consistency in following the laws across products and across locations. The result can be erratic treatment of consumer problems. It can also mean that root causes of regulatory violations go undetected.                                                            
  • Lacking formal policies and procedures: Not having formal, written documents that both detail consumer compliance responsibilities and instruct employees on the appropriate methods for executing these responsibilities can lead to inconsistencies, sloppy recordkeeping, and ultimately, consumer harm because nobody at the institution is clearly responsible to make sure laws are being followed.
  •  Forgoing independent consumer compliance audits: Independent audits are a good way for a company to routinely conduct quality-control checks on its operations. A compliance audit program provides a board of directors or its designated committees with information about whether policies and standards are being implemented. Without such a program, it is difficult to recognize any significant deficiencies in an institution’s compliance management system.

The CFPB is committed to helping industry establish good compliance systems and today’s report also offers guidance in how to do so. In general, both banks and nonbanks have committed to improving their compliance management systems in the future.

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  • OnlineEd is a provider of mortgage and real estate continuing and pre-license education and developer of the InlineEd compliance and learning management tracking system for the mortgage industry.
  •  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.
  • This article was published on August 21, 2013.  All information contained in this posting was 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 by the author before use.

CFPB Releases Informative Videos on YouTube

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CFPB rules hit the “big screen!”

Confused about the CFPB’s January 2013 new mortgage rules? Don’t have an afternoon to read a series of .pdf files? Check out the new videos that the CFPB just posted on YouTube.

We’re trying to make our rules more understandable and more user-friendly, setting out as clearly as we can what you need to know, and what you need to do, in order to comply with the rules.” – Richard Cordray, CFPB Director.

Following up to their March 2013 promise of publishing plain-language guides to January 2013 mortgage regulations in both written and video form, the CFPB has posted several videos on YouTube explaining these recently published regulations. The overview takes a little over one hour to watch, and is available to watch in one movie-like chunk, or in smaller segments concerned with each specific January 2013 rule. If you are looking for information without having to sift through pages and pages of online documents, OnlineEd highly recommends brewing yourself a cup of coffee and devoting an hour of your workday to familiarize yourself with these regulations.

The CFPB is actively looking for ways that they can make these new rules more accessible to every mortgage professional, and is taking comments and criticism. Richard Cordray has this to say:

We’re currently taking feedback on the guides, so please let us know what you think.”

Information on how to submit feeback is contained with each of the guides.