Two Lenders Penalized on HMDA Violations

The ""Consumer Financial Protection Bureau"":http://www.consumerfinance.gov/ (CFPB) has ordered two mortgage lenders to pay civil penalties for violating the Home Mortgage Disclosure Act (HMDA) with allegedly inaccurate for applications from 2011.

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According to a release from the agency, ""Mortgage Master"":http://www.mortgagemaster.com/corporate/ (a nonbank headquartered in Walpole, Massachusetts), and ""Washington Federal"":http://www.washingtonfederal.com/home.aspx (a Seattle-based bank), failed HMDA reviews when it was determined ""that their compliance systems were inadequate and that they had severely compromised mortgage lending data.""

The HMDA, passed in 1975, requires lenders to make loan information to the public in order to ensure there are no violations of the Equal Credit Opportunity Act (ECOA) and to stop lending discrimination.

""When financial institutions report inaccurate information, it obstructs the purpose of the Home Mortgage Disclosure Act and makes it more difficult for the CFPB to discover and stop discriminatory lending,"" said CFPB Director Richard Cordray. ""Today we are sending a strong signal that no mortgage lending institution--whether bank or nonbank--should be able to mislead the public with erroneous data.""

CFPB's consent order for Mortgage Master--issued alongside an order from the Commonwealth of Massachusetts Division of Banks--requires the lender to pay a penalty of $425,000 and to correct and resubmit its 2011 HMDA data. Mortgage Master is also directed to develop and implement a compliance system to prevent future violations.

In a statement, Mortgage Master clarified that CFPB's finding was related to administrative errors in the company's reporting system and that none of the violations harmed borrowers in any way.

""Mortgage Master has a strong commitment to comply flawlessly with all reporting requirements. ... We have addressed the system issues that caused the reporting errors and we are in the process of verifying the accuracy of all data through the end of [the] second quarter of 2013,"" the company said.

Washington Federal is required to pay $34,000 in addition to making the same changes to its reports and compliance system.

In its own statement, Washington Federal said it agreed to the consent order because it did not believe the technical issues involved or the penalty justified litigation. The bank did, however, protest against the language in CFPB's announcement, saying it was inconsistent with prior discussions, ""including [the agency's] repeated statements to us that the order is the equivalent of a 'traffic ticket.'""

""For the record, the consent order relates to very technical interpretations of application data, such as date of application, on a sample of files reviewed during an examination occurring over a year ago,"" the statement reads. ""While we differ with their conclusions, we also realize that the CFPB has the final say and we will strive to meet their expectations in future examinations.""

Since CFPB discovered the inaccuracies, the bureau says both entities ""have been taking steps to improve their HMDA compliance management systems and the accuracy of their HMDA mortgage loan information.""

The agency also took the opportunity to issue a ""bulletin"":http://files.consumerfinance.gov/f/201310_cfpb_hmda_compliance-bulletin_fair-lending.pdf outlining how it enforces the HMDA. ""Another bulletin"":http://files.consumerfinance.gov/f/201310_cfpb_hmda_resubmission-guidelines_fair-lending.pdf was issued describing CFPB's resubmission schedule and guidelines and setting a standard for error thresholds that examination teams will use to determine when institutions should correct and resubmit their data. The new guidelines apply to reviews that begin on or after January 18, 2014.