Mortgage originator practices at some regulated entities have resulted in actions by the Consumer Financial Protection Bureau.
At least one institution incorrectly calculated the amount financed on loans with discount credits, as well as the finance charge.
The
calculation method used to determine the amount financed in that case resulted in a negative finance charge and incorrect amount financed.
The mistakes were violations of Regulation Z and caused the bureau to demand a cease to the practice and that the company educate employees about proper disclosures.
The actions were discussed in the CFPB’s Supervisory Highlights: Summer 2016 and published in the Federal Register on Monday.
One or more institutions had affiliated business arrangements that didn’t meet the Real Estate Procedures Act’s Regulation X requirements. A referral by one institution required the use of an affiliated provider not among prescribed settlement services.
“The majority of consumers who received the incorrect ABA disclosure did not pay the fees charged by the affiliated service provider as these fees were lender paid,” the CFPB stated. “Supervision directed the institutions to revise the affiliated business disclosures to avoid improper referrals.”
Another Reg Z violation involved at least one firm offering interest-only bridge loans but failing to accurately disclose the interest payment because of a software error.
“Supervision directed the institutions to examine and assess whether the monthly payment amounts of the affected loans were correctly applied to accrued interest and the principal amount,” the report said. “Institutions were also directed to ensure that the final balloon payment was assessed in accordance with the mortgage note.”
The report indicated that there was at least one institution that took adverse action based on consumer reports but failed to make disclosures required by the
Fair Credit Reporting Act. A lack of training, as well as inadequate policies and procedures, were blamed for the violations.
The CFPB cited the case of a company with weak oversight of automated systems, and another that failed to monitor for changes that would require updated disclosures to comply with applicable federal laws.
The lenders were required to enhance monitoring and compliance audit practices before using revised disclosures. They also were required to revise compliance audit practices to ensure that adverse action notices were properly completed.
“After supervision notified the entities’ management of these findings, the entities took corrective action to improve their compliance management systems,” the report stated.
