CFPB hits two lenders with thousands in penalties over HMDA data

Washington Federal, Mortgage Master respond to allegations

The Consumer Financial Protection Bureau fired a shot across the bow Wednesday, announcing thousands in penalties against two mortgage lenders for failing to accurately collect and report data on certain mortgages, as required under the Home Mortgage Disclosure Act.

The two targeted firms – Mortgage Master out of Walpole, Mass., and Washington Federal out of Seattle – will have to pay $425,000 and $34,000 in penalties, respectively, after the CFPB claimed it had found numerous data errors in the firms' mortgage applications.

The lenders released statements, with both highlighting the administrative nature of the alleged errors.

"After a rigorous audit, which took over a year, the Consumer Financial Protection Bureau raised a matter concerning our reporting under the Home Mortgage Disclosure Act," said Paul Anastos, president of Mortgage Master.

"Their finding was related to administrative errors in our reporting system, and the audit confirmed that no borrowers were harmed in any way, nor did any borrowers need to be refunded. We agreed to settle this matter with the CFPB and the state of Massachusetts," he added.

Washington Federal released its own statement, saying "We agreed to a consent order because we did not believe that the technical issues involved or the small penalty justified litigation. We are, however, disappointed with the harshness of the language in the CFPB’s press release, which in our view is not consistent with prior discussions, including their repeated statements to us that the order is the equivalent of a traffic ticket."

The two firms entered into consent orders, agreeing to pay penalties while making adjustments to ensure compliance with the CFPB’s guidelines under HMDA.

The penalties show not only the CFPB’s power, but the compliance areas it considers non-negotiable in the data collection process.

In this case, the CFPB is asserting its power under HMDA—an act that forces lenders to make certain loan information available to the public. HMDA information is often used to determine whether a lender is in compliance with other mortgage-related laws such as the Equal Credit Opportunity Act, the Fair Housing Act and the Community Reinvestment Act.

"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."

HMDA has been around since 1975, but Dodd-Frank transferred enforcement authority to the CFPB in 2010.

The CFPB’s takeaway from the probes was that Mortgage Master and Washington Federal had systems that "were inadequate and that they had severely compromised mortgage lending data."

The CFPB claims it found significant data errors on 20,015 Mortgage Master loan applications filed in 2011, while Washington Federal allegedly had 5,785 applications with issues.

The firms are required to collect and resubmit their 2011 HMDA data, while developing compliance systems.

Washington Federal candidly expressed its reaction to the CFPB's press release on this issue.

"For the record, the consent order relates to very technical interpretations of application data, such as date of application, on a sample of files reviewed during an examination occurring over a year ago," Washington Federal said. "While we differ with their conclusions, we also realize that the CFPB has the final say and we will strive to meet their expectations in future examinations. Here at Washington Federal, we look forward to continuing our nearly 100-year track record of doing the right thing for our clients.”

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