I get tons of questions about whether the changes taking place in Washington D.C. mean that settlement agents can forget about compliance. Today, the CFPB ordered a mortgage lender to pay a $1.75 million civil penalty for violating the Home Mortgage Disclosure Act (HMDA). This action will go on record as the largest HDMA civil penalty imposed by CFPB to date, and sets a clear precedent for how the bureau plans to operate moving forward. Click here to see the Consent Order. In its’ enforcement action, the CFPB found the mortgage lender’s data and reporting practices resulted in inadequate ratings which stemmed from the following:
- Inadequate ongoing monitoring of vendors related to HMDA.
- Not implementing adequate compliance management measure to detect and prevent deficiencies.
- Not performing formal compliance tests, audits or transaction tests of HMDA data.
In addition to a civil penalty, the CFPB ordered the mortgage lender to “access and undertake” necessary improvements to its compliance management system to prevent future violations. This action comes at a time when HMDA requirements are about to be increased and the amount of data available coupled with unprecedented levels of transparency will pose higher compliance risk for banks and mortgage lenders. To add to this, the CFPB’s order to Prospect Mortgage (and also two real estate brokers) to pay fines in the combined amount of $4 million for illegal kickbacks sends a strong message to the industry about RESPA compliance. Click here to see the Consent Order. Simply put- compliance still matters!
We know that the business of settlement and closing can directly impact the consumer. Settlement agents gather essential data. They coordinate the transfer of ownership. They handle important events that lead to closing a loan. Lenders are very much aware of the risks and benefits of working with settlement agents who are concerned (or not) about compliance. The recent HMBA and RESPA consent orders make it clear that we cannot forget about compliance as long as lenders are a customer. In addition, with concerns about compliance growing, it is likely that we will begin to see lenders requesting more and better quality data from settlement agents. Case in point: recently, a lender expressed concerns that CFPB examiners would determine a loan was improperly reported under HMBA because the title company failed to show a seller on a disclosure form. Concerns like this from lenders are becoming more and more common, and increasingly playing a role in how settlement agents do business. We will also begin to see more actions taken against lenders as CFPB no longer has to wait for an examination to analyze lender’s compliance. This will likely impact the standards lenders are currently using to vet and verify settlement agents. Finally, with greater data reporting requirements under HMBA due out soon, protecting the privacy of the consumer is more important than ever. Settlement agents continue to have an important and essential role in the protection of non-public personal information.
As long as regulators care about what banks are doing, you have to care about what you are doing to protect the lender’s customer and ensure compliance. You must continue to be ready to demonstrate how you have a compliance plan and procedures in place to protect the lender’s customers. After all, in this industry the customer should always come first.