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Mortgage

The CFPB identifies 6 compliance violation trends

Number three bodes ill for TILA-RESPA problems

The Consumer Financial Protection Bureau pulled back the curtain on what investigations go on inside the regulator and what mortgage violations the industry is likely to make.

The bureau’s seventh edition of supervisory highlights covers activities between July 2014 and December 2014, resulting in remediation of $19.4 million to more than 92,000 consumers.    

“We are sharing our latest supervisory highlights report with the public so that industry can see trends, examine their own practices, and be proactive to make needed changes before consumers are hurt,” said CFPB Director Richard Cordray.

“The CFPB will continue to monitor both bank and nonbank markets to ensure deception is rooted out, deficiencies are corrected, remediation is given to consumers, and violations are stopped in their tracks.”

Although the bureau is willing to share findings from these examinations, it maintains the confidentiality of supervised entities.

In all cases where CFPB examiners find violations of law, they alert the institutions to their concerns and outline necessary remedial measures. The CFPB often finds problems during supervisory examinations that are resolved without an enforcement action.

Here are the six mortgage violations that the CFPB said it saw on one or more examinations:

  1. Loan originations cannot receive compensation based on a term of a transaction. Regulation Z prohibits a loan originator from receiving compensation based, directly or indirectly, on the terms of a consumer credit transaction secured by a dwelling.
  2. Improper use of lender credit absent changed circumstances. Regulation X requires that a loan originator be bound, within the applicable tolerances, to the settlement charges and terms listed on the Good Faith Estimate provided to the borrower, unless a revised GFE is provided prior to settlement.
  3. Failing to provide the Good Faith Estimate in a timely manner. Regulation X requires that a lender provide a GFE not later than three business days after it receives an application, or information sufficient to complete an application. Regulation Z also requires creditors, in certain mortgage transactions secured by a consumer’s dwelling, to provide a good faith estimate of the Truth in Lending disclosure not later than the third business day after the creditor receives the consumer’s written application.
  4. Improperly using advertisements with triggering terms without the required additional disclosures. Regulation Z requires advertisements to include disclosures when certain triggering terms are advertised.
  5. Adverse action notice deficiencies and failure to provide the notice in a timely manner. Regulation B requires a lender to notify an applicant of action taken within 30 days after receiving a completed application regarding the creditor’s adverse action on the application.
  6. Deficiencies in compliance management systems. A sound and robust compliance management system is essential to ensuring compliance with federal consumer financial law and preventing associated risks of harm to consumers.

Click here for the full report, which also delves into areas of payday lending, overdraft practices and student debt violations.  

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