On Wednesday, the Consumer Financial Protection Bureau (CFPB) ordered Nationstar Mortgage LLC to pay a $1.75 civil penalty for violating the Home Mortgage Disclosure Act (HMDA). The CFPB accused Nationstar of failing to report accurate data about mortgage transactions for 2012 through 2014. In addition, Nationstar must take the necessary steps to improve compliance and prevent further violations.
This is the largest HMDA civil penalty proposed by the CFPB to date due to Nationstar’s market size, the magnitude of its errors, and Nationstar’s own history of violations. Nationstar has been on notice of HMDA compliance problems since 2011.
“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.”
As the CFPB supervised banks and nonbank mortgage lenders, it reviews the accuracy of HMDA data and the adequacy of HMDA compliance programs. Many lenders and banks have adequate compliance systems and produce HMDA data with few errors, though Nationstar fell short.
Nationstar’s HMDA compliance system was found to be flawed, and generated mortgage data with significant though preventable errors. In addition, Nationstar failed to maintain detailed HMDA data and validation procedures. It also produced discrepancies by failing to consistently define data among its various lines of business.
Nationstar previously faced compliance issues in 2011, when the Commonwealth of Massachusetts Division of Banks settled with Nationstar to address HMDA compliance deficiencies. For three consecutive years, the CFPB found error rates at Nationwide of 13 percent in 2012, 33 percent in 2013, and 24 percent in 2014.
Nationstar responded with a statement declaring that these issues do not reflect their customer and compliance driven practices. "Nationstar understands how accurate HMDA data is critical to fair lending, and we regret the mistakes that led to the reporting errors," said the statement.
"The settlement does not reflect any wrong-doing impacting customers or fair lending; but rather, technical data issues that we have worked tirelessly to resolve through significant investments."
Nationstar is a wholly owned subsidiary of Nationstar Mortgage Holdings Inc based in Coppell, Texas. 2014 data ranks Nationstar as the ninth- largest HMDA reporter by applications received. The company earns fees through servicing, origination, and other real-estate based services.