And the Consumer Financial Protection Bureau (CFPB) strikes again.
The CFPB flexed its enforcement muscles last month and penalized two lenders for inaccurately reporting Home Mortgage Disclosure Act (HMDA) data. The lenders were fined $425,000 and $34,000 respectively for numerous errors in their mortgage loan application data.
HMDA data collection is required of:
- depository institutions (such as banks, savings associations and credit unions) which:
- are federally insured or regulated, make federally related loans or make loans intended for purchase by Fannie Mae or Freddie Mac;
- have, as of the previous December 31, assets greater than an inflation-adjusted annual threshold ($42 million in 2013);
- have a branch office in a metropolitan statistical area (MSA); and
- originate at least one purchase or refinance loan secured by a one-to-four unit residential property; and
- non-depository institutions (such as warehouse or hard money lenders) which
- had the larger of $25 million or 10% of the total dollar amount of loan originations go to home purchase or refinance loans in the preceding calendar year;
- have a branch office or originate, purchase or receive applications for more than 5 home mortgage loans located in an MSA in the preceding calendar year; and
- have total assets exceeding $10 million on the previous December 31 or originate more than 100 home purchase loans in the preceding calendar year.
Lenders of both kinds are subject to HMDA data reporting only if they meet all of the criteria above. Mortgage loan brokers who receive and process home loan applications on behalf of warehouse lenders and other investors are also subject to HMDA so long as they themselves make the credit decision on the application.
Data collected under HMDA is made available to the public to increase transparency and reveal discriminatory lending patterns. [12 Code of Federal Regulations §1003.6(a)]
CFPB Bulletin 2013-19 Fair Lending, Consumer Financial Protection Bureau
The two lenders fined by the CFPB attempted to argue their errors were clerical. The CFPB responded with a bulletin stressing the importance of stringent accuracy where HMDA compliance is concerned.
Regardless of whether the violations were honest mistakes, clerical snafus, administrative deficiencies, or anything else, the penalties speak loud and clear: the CFPB is in no mood for excuses.
first tuesday insight
This year, we’ve seen the CFPB take action on several fronts, including:
- levying penalties on a settlement law firm for paying kickbacks to real estate and mortgage brokers in violation of the Real Estate Settlement Procedures Act (RESPA);
- ordering $13 million in restitution and fines from a lender for pushing pricier mortgages on buyers; and
- fining a mortgage insurer for another illegal kickback scheme in which the insurer paid lenders in exchange for referrals of private mortgage insurance business.
The CFPB was born from the Dodd-Frank Wall Street Reform and Consumer Protection Act and is the cause célèbre of consumer protection champion Senator Elizabeth Warren. It’s no coincidence financial reformers like Sen. Warren & Co. are making headlines at the same time banks are ponying up multibillion-dollar mortgage settlements and facing criminal prosecution. They’ve indicated little sympathy for the financiers whose misdeeds gave us the Millennium Boom and its twin spawn, the 2008 Financial Crisis and subsequent Great Recession.
And there’re more CFPB controls on the consumer finance industry to come—ability-to-repay rules take effect in January 2014, and consolidated mortgage disclosure requirements kick in the following year.
But we’ve already seen the CFPB, among others, bow to lender pressure on qualified residential mortgage (QRM) definitions. With a few exceptions, regulators have proven unwilling to pursue full criminal charges for the architects of the mortgage crisis. And it’s become clear those headline-grabbing mortgage settlements from Chase and their ilk amount to slaps on the wrist in light of the damage big banks dealt.
Up to this point, the CFPB has given lenders and loan originators plenty of reasons to detest it. If the agency is to fulfill its namesake mandate, there will be plenty more reasons for mortgage lenders to hate the CFPB in the future. Remember, lenders always cry about everything they are told to do. We say, hate on: if lenders love the CFPB, then the agency isn’t doing its job of protecting society against deceptive and damaging conduct of lenders.
For more reading on HMDA, see the first tuesday Realtipedia volume Agency, Fair Housing, Trust Funds, Ethics and Risk Management, Fair Housing Chapter 10: Home Mortgage Disclosure Act.
Re: “CFPB hits two lenders with thousands in penalties over HMDA data”, from Housing Wire