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Politics & Money

New evidence shows CFPB knew about discrimination well before AB article

CFPB in the hot seat in racial, gender disparity hearing in Congress

(Revised 12:25 p.m. ET to include new statements from CFPB.)

It was a morning of jockeying for points, preemptive defensive declarations, wholesale scoreboarding and a full-court press to discredit allegations of discrimination and retaliation at the Consumer Financial Protection Bureau Wednesday morning in Congress.

This was the second of two hearings into a pattern of unequal treatment of African Americans, Hispanics, women and those over 40. The first was held April 2.

(NoteThe CFPB will be the subject of another House Financial Services Committee hearing at 2 p.m. ET Wednesday on proposals to improve transparency and accountability at the CFPB. HousingWire will have coverage.)

New evidence shows, and the CFPB has conceded, that white male employees were more likely to receive positive performance ratings than minority, women and older employees. The CFPB was aware of these problems as early as September 30, 2013, when a Deloitte Consulting report showed there were disparities in employee evaluations.

The hearings Wednesday were prompted by a story broken in American Banker in March that detailed a pattern of personnel problems including evidence that “the CFPB's own managers have shown distinctly different patterns in how they rate employees of different races.”

According to confidential agency data reviewed by American Banker, “CFPB managers show a pattern of ranking white employees distinctly better than minorities in performance reviews used to grant raises and issue bonuses. Overall, whites were twice as likely in 2013 to receive the agency’s top grade than were African-American or Hispanic employees.”

Since then it has come to light the CFPB management was aware of the allegations in January 2014.

In addition to the subpoenaed witnesses’ testimony, today’s hearing shed new light on long-standing problems concerning the CFPB’s treatment of its employees.

During the hearing, the subcommittee discussed a report commissioned by the CFPB and conducted by Deloitte Consulting.  The findings of Deloitte’s report corroborate whistleblower and CFPB employee Angela Martin’s testimony that there have been  problems related to the CFPB’s hiring, staff promotions, performance reviews and employee pay since the Bureau’s inception. 

Deloitte’s report also suggests that the Bureau’s Office of Minority and Women Inclusion (OMWI) is ineffective and that CFPB leaders and employees are uncertain what OMWI actually does. 

“Out of the 31 leadership interviews Deloitte conducted, approximately 80% expressed that they do not understand the purpose or objectives of the OMWI office,” the report states.

Deloitte delivered the study to the CFPB in September 2013.

"Director (Richard) Cordray was briefed on the 2013 performance ratings problems in January 2014. That same month, he directed the bargaining team to work with the union to move toward a new performance ratings system," said CFPB spokesperson Jen Howard. "That was two months before any media article was published. He also ordered additional analysis at the same time – to better understand the data and potential problems. This additional analysis was the basis of the remediation action taken this week."

Republicans on the committee were quick to condemn the bureau for hypocrisy and inaction. Democrats on the panel were equally quick to demand these problems at the bureau don’t justify any attempt to rein in the CFPB’s reach and make it more transparent, arguing that the CFPB should not be singled out when disparity exists in some measure in every part of the federal government.

“In the coming months, the committee expects to hear from all those who can shed light on allegations of discrimination and retaliation. The Bureau must be held accountable for any such reprehensible behavior,” said House Financial Services Committee Chairman Jeb Hensarling, R-Texas.

“The purpose of this hearing is to vindicate the American bankers and the financial services industry and their attempt to make CFPB look hypocritical,” Rep. Keith Ellison, D-Minn., said.

U.S. Rep. Waters, D-Calif., and an ex-officio subcommittee member, said that she was pleased with the steps Cordray has taken.

"I am shocked that anybody would be shocked that there is some kind of inequality," said U.S. Rep. Emmanuel Cleaver, D-Mo.

The two witnesses – Benjamin Konop, executive vice president, National Treasury Employees Union, and Liza Strong, lead of labor and employee relations at the CFPB – told very different tales.

Strong said the testimony of one CFPB employee – Angela Martin – and a report commissioned by the CFPB were both unfounded. She also said that her office found no evidence to support allegations by Martin of discrimination.

The CFPB has admitted that African American and Hispanic employees, workers over the age of 40 and others were more likely to receive ratings below the top score in reviews used to set merit raises in 2012 and 2013.

Konop and Strong both said that they were not aware of the Deloitte report until Tuesday.

This shocked one committee member – because the spokesman for the CFPB said that employee relations and union partners were engaged in trying to address the problems raised by the Deloitte report right from the beginning.

An increasingly frustrated U.S. Rep. Ann Wagner, R-Mo., noted that Konop and Strong were exactly whom the CFPB spokesman said had been engaged in response to the Deloitte report, despite both saying that they had only learned of the report on Tuesday.

“So it’s out there for eight months, and you’re saying you didn’t know about it until yesterday?” Wagner asked, incredulous.

Konop testified that the employees union repeatedly raised concerns with the CFPB about its employee performance review system.  

“[W]e alleged that women and minority employees were being underpaid when compared to similarly situated white male colleagues.  To date, the Bureau has denied each of these grievances at all stages, often using inconsistent reasoning, despite what I feel is convincing evidence of low pay for numerous women and minority workers,” Konop told the subcommittee.

Howard said the CFPB has offered to have other CFPB employees testify about the Deloitte report.

"The Deloitte report was commissioned by the Office of Minority and Women Inclusion, as part of its work to promote diversity and inclusion at the CFPB. The assistant director of that office, Stuart Ishimaru, led that process and is the expert on those findings. That expertise is why we offered to have Mr. Ishimaru testify at the April hearing on behalf of the Bureau. Unfortunately, the Committee declined that offer," Howard said.

Konop told the committee that the CFPB was not responsive when the union first identified suspected pay and promotion disparities in September 2013, and that a report by the union supported the allegations the CFPB faces.

“We were shocked when we saw the disparity,” Konop said.

Strong said that the CFPB’s compensation system is applied consistently and does not consider race, age and gender.

The CFPB denied attempts by 15 female and minority workers to show that they were paid unequally from white male employees, Konop said in prepared testimony for a House of Representatives hearing on Wednesday.

"I've witnessed (CFPB) management struggle, at times, to live up to the mission, ideals and achievements of the CFPB," Konop said.

This week, following the publication of internal analysis that showed many employees were unfairly disadvantaged, officials said they would retroactively compensate people who received middling reviews in 2012 and 2013 as if they had gotten top marks.

“This week, we announced that we are remediating all employees harmed by the problems with the performance ratings system. By self-identifying and self-correcting these issues, we are holding ourselves accountable to the same standards of fairness that we expect of our regulated entities. Our determination to resolve these issues appropriately is motivated by our acknowledgment that our employees deserve to expect the highest standards,” Howard said.

Martin, who was hired directly by CFPB director Richard Cordray, said she was a victim of discrimination and employee retaliation at the hands of the CFPB’s leadership, and that many of the staff at the CFPB have come to her with similar complaints, but they are afraid to report problems for fear that they will suffer the same retaliation she has.

"When you look at me, you must see dozens of employees in my stead," Martin said in April.

Misty Raucci, former Investigator for the Defense Investigators Group, said in April that she was tasked by the CFPB to look into allegations of discrimination, and that she concluded that Martin was indeed the victim of retaliation.

Strong attacked both Raucci’s work and her report as unreliable and based on anonymous sources.

Raucci testified that a culture of exclusion, retaliation and collusion is pervasive throughout the division of CFPB in which Martin worked, the Office of Consumer Response.

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