The CFPB is aggressively moving forward with its examination of members of the mortgage industry. Ongoing examinations
of financial institutions commenced in 2011, and the CFPB is expanding its examinations to nonbank institutions. Earlier this year, the bureau released its Mortgage Origination Examination Procedures, which is a supplement to the voluminous Examination Field Manual it released during 2011. Of further note, state regulatory agencies are fully committed to working with the CFPB to enhance supervision for both groups. With this in mind, it is important that all mortgage companies, whether regulated by federal or state agencies, take proactive steps to prepare for CFPB oversight. Those proactive measures will not only assist with any CFPB examination that occurs, but will also better prepare institutions for any potential examinations with their primary regulators.
To begin evaluating whether your company is prepared for a CFPB examination, an initial dialogue between executive management, operations managers and the company’s legal and compliance personnel is necessary. During this initial dialogue, all parties should discuss and evaluate the entity’s risk profile.
Afterward, the company’s legal and compliance professionals should review existing policies and procedures to determine whether revisions are necessary. To the extent that revisions are necessary, personnel should consider, among other things: ONE | the Mortgage Origination Examination Procedures released by the CFPB; TWO | the CFPB’s Field Guide for its examiners; and THREE | the Multistate Mortgage Committee Examination Manual. These publicly available documents set forth the criteria that the CFPB and state examiners will use to evaluate regulated institutions.
As a company prepares for future examinations, personnel must consider existing internal and industrywide best practices, as well as the historical compliance record for the company. For example, if all of an institution’s similarly situated peers have ceased using certain business practices, the company needs to re-examine its procedures, as it may be out of step with much of the industry and lead to compliance problems.
Institutions should also review their past examination reports, whether those reports were received from regulatory agencies or from third parties. The findings in those reports may identify deficiencies that require correction. When evaluating how to prepare for the CFPB and potential examination, mortgage institutions should consider their compliance success with the Real Estate Settlement Procedures Act, the Truth in Lending Act, the Home Mortgage Disclosure Act and the Equal Credit Opportunity Act. Particular attention should be given to fair lending matters, as the CFPB will focus on that area. The CFPB also intends to consider whether mortgage companies may be violating Unfair and Deceptive Acts and Practices statutes.
When reviewing past audits
might suggest that an entity successfully meets necessary compliance obligations. On the other hand, if repeat violations occur, additional compliance resources may be appropriate.
Once all of these matters are evaluated, compliance professionals, operations personnel and executive management should work together to establish an operations and compliance strategy. This strategy should be a roadmap for bolstering an entity’s compliance efforts. Doing so will better prepare mortgage companies for examination by the CFPB and their respective primary regulatory agencies.