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CFPB officially hits Nationstar with $1.75 million fine for HMDA violations

Biggest HMDA fine ever issued by CFPB

Last week, Nationstar Mortgage revealed that it faced a potential fine from the Consumer Financial Protection Bureau over the company’s alleged failure to comply with the reporting requirements of the Home Mortgage Disclosure Act.

And Wednesday, those HMDA chickens came home to roost.

The CFPB announced Wednesday it is fining Nationstar $1.75 million for HMDA reporting violations.

According to the CFPB, Nationstar’s $1.75 million fine is the largest HMDA civil penalty ever imposed by the CFPB. The size of the fine is based on “Nationstar’s market size, the substantial magnitude of its errors, and its history of previous violations,” the CFPB said.

According to the CFPB, the fine is based on Nationstar “consistently failing to report accurate data” about mortgage transactions from 2012 through 2014.

In a statement to HousingWire, Nationstar expressed "regret" for the mistakes that led to the reporting errors.

The CFPB noted that Nationstar was already “on notice” on HMDA violations stretching back to 2011.

The Home Mortgage Disclosure Act, referred to as HMDA, was originally enacted in 1975 and requires many financial institutions to collect data about each company’s housing-related lending activity.

As part of HMDA, companies are required to disclose information regarding home purchase loans, home improvement loans and refinance loans that they originate or purchase, or for which they receive applications.

HMDA also requires financial institutions to report to the appropriate federal agencies and make the data available to the public, which regulators can use for various oversight reasons.

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.

And according to the CFPB, Nationstar did not fulfill its HMDA reporting obligations.

“Financial institutions that violate the law repeatedly and substantially are not making serious enough efforts to report accurate information,” said CFPB Director Richard Cordray. “Today we are sending a strong reminder that HMDA serves important purposes for many stakeholders in the mortgage market, and those required to report this information must make more careful efforts to follow the law.”

In a statement, Nationstar noted that the issues identified by the CFPB related only to “technical data issues” that the company has “worked tirelessly to resolve through significant investments,” rather than “any wrong-doing impacting customers or fair lending.”

According to the CFPB, in the course of its supervision process of Nationstar’s compliance with HMDA, the bureau found that Nationstar’s HMDA compliance systems were “flawed, and generated mortgage lending data with significant, preventable errors.”

The CFPB also noted that Nationstar “failed to maintain detailed HMDA data collection and validation procedures, and failed to implement adequate compliance procedures.”

The company also “produced discrepancies by failing to consistently define data among its various lines of business,” the CFPB said.

The CFPB notes that Nationstar “has a history of HMDA non-compliance,” including a 2011 settlement with the Commonwealth of Massachusetts Division of Banks over HMDA compliance deficiencies.

According to the CFPB, the samples it reviewed showed “substantial error rates” in three consecutive reporting years, even after the Massachusetts settlement.

The CFPB said that it found error rates of 13% in 2012, 33% in 2013, and 21% in 2014 in the loans it reviewed from Nationstar.

In addition to paying the $1.75 million fine, Nationstar is also required to develop and implement an “effective compliance management system.” Nationstar is also required to “assess and undertake any necessary improvements to its HMDA compliance management system to prevent future violations.”

Nationstar is also required to fix its HMDA reporting issues. “Nationstar must review, correct, and make available its corrected HMDA data from 2012-14,” the CFPB said.

The CFPB notes that since its examination, Nationstar “has been taking further steps to improve its HMDA compliance management system and increase the accuracy of its HMDA reporting,” a sentiment shared by Nationstar.

“Nationstar understands how accurate HMDA data is critical to fair lending, and we regret the mistakes that led to the reporting errors. These data issues are not reflective of our customer and compliance-driven business practices, and we remain committed to treating every applicant fairly and responsibly,” Nationstar said in a statement.

“Over the past two years, Nationstar has proactively made substantial investments in new staff, training and technology to enhance all of our HMDA-related processes and controls,” the company continued.

“As Nationstar made these sizable investments in enhancing our HMDA processes, we provided the CFPB with frequent updates to reinforce that our leadership takes regulatory compliance seriously,” the company added.

“Moving forward, Nationstar will continue to foster a culture of compliance, ethics and innovation,” the company concluded. “As we continue on our journey to reinvent the mortgage experience and keep the dream of homeownership alive, nothing is more important than maintaining our customers’ confidence and trust.”

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