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CFPB Hands Out $459k in Penalties for HMDA Violations

Orders issued against 2 lenders over data errors

Oct. 9, 2013

By Mortgage Daily staff

The Consumer Financial Protection Bureau issued a five-figure civil money penalty to a Washington Financial Institution, while a mortgage lender out of Massachusetts was hit with a six-figure CFPB penalty in addition to a state fine. Both firms are accused of misreporting loan data.

A CFPB consent order was issued against Washington Federal, according to an announcement Wednesday. The order settles alleged violations of the Home Mortgage Disclosure Act.

The bureau claims that an examination of the Seattle-based financial institution uncovered "significant errors" in the 5,785 loan applications it reported for 2011. The errors resulted from inadequate compliance systems.

The consent order includes a $34,000 civil money penalty and requires Washington Federal to correct and resubmit its 2011 HMDA data and develop and implement an effective HMDA compliance management system to prevent future violations.

Another CFPB consent order was issued against Mortgage Master, which reportedly had significant data errors in its 21,015 applications reported for 2011.

The order against Mortgage Master requires that it pay a $425,000 civil penalty, correct and resubmit its 2011 HMDA data and develop and implement an effective HMDA compliance management system to prevent future violations.

The regulator said that the Mortgage Master investigation involved a close collaboration with the Commonwealth of Massachusetts Division of Banks, which additionally issued an order against the Walpole, Mass.-based firm that included a $50,000 fine.

Mortgage Master President Paul Anastos issued a statement indicating that the CFPB's more than one-year audit found administrative reporting errors and confirmed that no borrowers were harmed. He noted that the company is strongly committed to "comply flawlessly with all reporting requirements" as regulators apply greater scrutiny in all areas of regulatory enforcement.

"We have addressed the system issues that caused the reporting errors and we are in the process of verifying the accuracy of all data through the end of second quarter of 2013," Anastos stated. "We will continue to evaluate all business operations to ensure they are efficient, effective, and compliant."

For its part, the CFPB said it is putting the mortgage industry on notice about the importance of accurate HMDA data and effective HMDA compliance management systems.

"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," CFPB Director Richard Cordray said in a statement. "Today we are sending a strong signal that no mortgage lending institution -- whether bank or non-bank -- should be able to mislead the public with erroneous data."

Both mortgage lenders have taken steps to improve HMDA compliance management and HMDA data accuracy since they were uncovered by the CFPB, according to the bureau.

The CFPB noted that it has conducted HMDA reviews at dozens of bank and non-bank mortgage lenders and found that many have adequate compliance systems.

HMDA bulletin issued by the CFPB discusses components of an effective HMDA compliance management system, details factors the CFPB may consider when evaluating whether to pursue a public enforcement action and lists the error thresholds that CFPB examination teams will use to determine when institutions should correct and resubmit their HMDA data.

A new HMDA resubmission schedule and guidelines apply to HMDA reviews starting on Jan. 18, 2014.

"CFPB examination teams will use different guidelines when they conduct HMDA reviews at banks and non-banks that have 100,000 or more mortgage loans to report," today's announcement stated. "This is because a low error rate at a large institution can reflect a larger number of HMDA data errors than a comparable error at a smaller institution."

HMDA bulletin | HMDA resubmission schedule

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