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What Does the CFPB’s Warning Mean for Lenders?

Last week, the Consumer Financial Protection Bureau (CFPB) issued a letter of warning to 44 mortgage lenders and brokers that their mortgage data collecting and reporting might not be quite up to speed.

Under the Home Mortgage Disclosure Act (HMDA), which was originally enacted in 1975 and updated by the CFPB last year, mortgage lenders are required to collect and report housing- and mortgage-financing data so that the CFPB can determine whether or not the institutions are meeting their communities’ needs—and identify possible discriminatory lending patterns.

In their letter, the CFPB asked those 44 lenders and brokers to review their practices to ensure that they are HMDA-compliant—and if they are not, to make sure they take steps to become compliant.

“For the present, it's just more indication that the CFPB is actively overseeing HMDA issues and watching them at lenders,” said Mike Flynn, Partner in the Financial Institutions Group of law firm Goodwin Procter. “The CFPB takes pride in being a technology-focused agency, and they obviously have found and examined data that led them to believe that some of these companies should be reporting when they aren't, and so they reached out to them. I think that's an indication of a couple of things. One, they are actively looking at who really should be reporting, which is a reminder to everyone to really get that right, and second, it's an indication that they are taking HMDA very seriously and fair lending very seriously, and that's just another example of why you should be very careful in following all the rules regarding HMDA data collection and reporting and your fair lending analysis that you do.”

With the CFPB putting 44 mortgage lenders and brokers on notice due to possible HMDA violations, what, if anything, should other mortgage lenders and brokers take away from this?

“That same message plays out going forward, but additionally, it does shine a bit of a spotlight on the new amended HMDA rule, parts of which take effect in 2017 and parts of which take effect in 2018 and beyond,” Flynn said. “There are some companies that will have to be reporting under HMDA for the first time starting in 2017, and I think this letter is an indication to people who may fall in that bucket that they better make sure that if they are a company that should be reporting, they are reporting, because the CFPB is really monitoring for that.”

Flynn continued, “For other companies that are already covered by HMDA but will have to possibly report some different transactions and report them in more detailed ways in the future, this is just another reminder that the CFPB does in fact monitor HMDA very closely and monitor people's compliance with HMDA very closely. Therefore, as you are rolling out the new rule implementation at your shop, you need to focus on, number one, understanding what is required with the new rule, and what is required particularly for your company; and number two, as you're implementing tests, make sure that you are in fact capturing, collecting, and are capable of reporting the data you're supposed to be reporting. It's just an example of why everyone needs to be aware that this is a heightened scrutiny area, and everyone needs to pay close attention, both now and under the new rule.”

About Author: Seth Welborn

Seth Welborn is a Harding University graduate with a degree in English and a minor in writing. He is a contributing writer for MReport. An East Texas Native, he has studied abroad in Athens, Greece and works part-time as a photographer.
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