True Stories: Hybrid, eNote and RON Implementation

Join expert panelists that will discuss the status of federal legislation, trends in digital adoption and how best to prepare your organization for the next generation of lending processes.

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Attention lenders: The CFPB is now focusing more on fair lending in mortgages

A look at where the CFPB will increase its fair lending oversight this year

After looking back at its fair lending priorities for 2016, the Consumer Financial Protection Bureau highlighted what areas will be on the top of its radar for 2017.

Mortgages made to the top of the list, pinned as one of the three areas that the CFPB said it would increase its focus this year.

According to the CFPB’s 2016 Fair Lending report, “Based on the risks we identified, our market-level focus for the past five years has been on ensuring that consumers are not excluded from or made to pay more for mortgages, indirect auto loans, and credit cards because of their race, ethnicity, sex, or age.”

“Going forward, because of emerging fair lending risks in other areas, we are increasing our focus on redlining, mortgage and student loan servicing, and small business lending. We remain committed to assessing and evaluating fair lending risk in all credit markets under the Bureau’s jurisdiction,” the report stated.

The CFPB stated that mortgage lending continues to be a key priority for the Office of Fair Lending for both supervision and enforcement through 2017.

In particular, the CFPB has focused on redlining risk and evaluating whether lenders have intentionally discouraged prospective applicants in minority neighborhoods from applying for credit.

The bureau noted, however, that although statistics play an important role in this work, it never looks at numbers alone or in a vacuum, but rather considers multiple factors, including potentially nondiscriminatory explanations for differential lending patterns.

In last year alone, the CFPB’s fair lending supervisory and public enforcement actions resulted in approximately $46 million in remediation to harmed consumers.

“In the coming years, we will increase our focus on markets or products where we see significant or emerging fair lending risk to consumers, including redlining, mortgage loan servicing, student loan servicing, and small business lending,” said CFPB Director Richard Cordray.  

“Discrimination on prohibited grounds in the financial marketplace, though squarely against the law, is by no means a thing of the past,” he said. “The Consumer Bureau will continue to enforce existing fair lending laws at a steady and vigorous pace, taking care to ensure broad-based industry engagement and consistent oversight.”

John Culhane broke down the 68-page report in a blog post on the CFPB Monitor, stating that the three 2017 priority areas are the same as those identified by Patrice Ficklin, associate director of the CFPB’s Office of Fair Lending, in her December 2016 blog post that outlined the CFPB ‘s fair lending priorities for 2017. 

The blog post did point out that unlike Ficklin’s original post, the fair lending report includes the CFPB’s plans to ramp up its small business lending supervisory activity. 

Interestingly, the Fair Lending report touched on the warning letter the bureau sent to 44 mortgage lenders and mortgage brokers in October of last year over issues surrounding compliance with the Home Mortgage Disclosure Act.

The bureau stated at the time that it had “information that appears to show they may be required to collect, record and report data about their housing-related lending activity, and that they may be in violation of those requirements.”

But the report didn’t shed any extra light on the warnings and simply reiterated that companies are encouraged to respond to the CFPB to advise if they have taken, or will take, steps to ensure compliance with the law. They can also tell the bureau if they think the law does not apply to them.

“In this, our fifth Fair Lending Report to Congress, we outline our work in furtherance of our statutory mandate to ensure fair, equitable, and nondiscriminatory access to credit. Our work continues to reflect the areas that pose the greatest risk of consumer harm, and we continue to reprioritize our approach to better position our work to understand and address emerging issues,” the CFPB concluded.



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