Last week, the CFPB issued a warning letter to 44 mortgage lenders and brokers concerning possible violations related to their collection and reporting of mortgage data under the Home Mortgage Disclosure Act (HMDA) and Regulation C. HMDA requires mortgage lenders to collect and report data related to certain housing-related loans, in part to ensure those lenders do not engage in discriminatory practices. While the letter states that the CFPB has not made any finding of specific HMDA violations, it encourages institutions to undertake a review to ensure compliance with HMDA requirements and report any such efforts to the CFPB.
This letter comes on the heels of remarks made by Director Cordray to the Mortgage Bankers Association of America that the CFPB will continue to focus on issues of redlining and has partnered with the DOJ to bring “major enforcement actions” for discriminatory lending practices. The CFPB is clearly signaling to the industry that it will be actively looking for any perceived violations in supervisory reviews or through enforcement actions. There is wide speculation in the industry that the CFPB may be targeting mini-correspondent lenders as brokers are not required to report HMDA data.
As a former CFPB enforcement attorney, and in my current role as outside counsel representing financial institutions before the CFPB, I can state unequivocally that institutions should heed the CFPB’s warning We can assist you in undertaking a self-assessment of historic and existing practices. Institutions that self-identify and quickly remediate issues revealed upon review will be better positioned to convince the CFPB that hefty fines – or a public consent order – are not warranted. A mock exam or similar review can help determine whether enhancements in practices may be warranted.
Reed Smith has a team of lawyers to help you navigate these issues. Len Bernstein is the head of Reed Smith’s financial services regulatory practice and has closely followed the CFPB’s impending HMDA changes that will impact 2017 data collection. He can speak to your organization to assist with compliance planning. Tyree Jones has handled fair lending issues for many years, including successful defense of a mortgage company in one of the largest fair lending cases brought in the past decade. Bob Jaworski and Travis Nelson also have extensive experience supporting institutions in connection with mortgage-related issues. Finally, my practice focuses heavily on CFPB issues; I have supported several clients in handling CFPB supervision and enforcement matters.
If you are interested in learning more about the HMDA issues, please contact us.
Maria B. Earley is a Partner in the Financial Services Regulatory Group at Reed Smith LLP, resident in the Washington D.C. office. Prior to joining Reed Smith, Maria was an Enforcement Attorney with the Consumer Financial Protection Bureau. She has handled numerous matters involving federal and state regulators, including the CFPB, Office of the Comptroller of the Currency (OCC), Federal Deposit Insurance Corporation (FDIC), several state attorneys general and state banking agencies.