TheMReport

You Deal With It

TheMReport — News and strategies for the evolving mortgage marketplace.

Issue link: http://digital.themreport.com/i/222840

Contents of this Issue

Navigation

Page 47 of 67

the latest Or ig i nat ion SERVICING CFPB Penalizes Two Institutions for HMDA Violations a na ly t ic s Se r v ic i ng One bank and one non-bank agree to pay for violations related to applications from 2011. One in Five Loans Not QM Compliant s e c on da r y m a r k e t Some of today's loans would not meet the new rules set to take effect next month. O ne in five loans originated in today's mortgage market will not meet the requirements of the Consumer Financial Protection Bureau's (CFPB) Qualified Mortgage (QM) rule that goes into effect in January, according to California-based ComplianceEase. ComplianceEase reviewed the loans audited through its ComplianceAnalyzer, a loan auditing software, to determine what percentage of current loans would meet the new QM criteria. Of the 20 percent of loans that would not qualify, ComplianceEase determined fee levels would be the disqualifier for about half. The QM rule allows for points and fees of up to 3 percent. Loans that exceed the 3 percent maximum typically do so by about $1,500, according to ComplianceEase. The other source of loan disqualification is annual percentage rates (APRs) that exceed what is 46 | The M Report allowed through the QM rule, according to the company. Fannie Mae and Freddie Mac will not guarantee loans that do not meet QM standards in the new year. "Moreover, due to lack of marketability, lenders generally try to avoid originating loans known as 'high-cost' loans, which are subject to restrictions in the Home Ownership and Equity Protection Act (HOEPA)," ComplianceEase stated. About 3 percent of loans in today's market will be considered high cost under the new regulations, according to ComplianceAnalyzer's data. These loans generally carry fees exceeding the new cutoff by more than $1,000. "Banking and mortgage executives need to evaluate their technology providers very carefully because the QM rule can create legal liability for the life of a loan," warned John Vong, president of ComplianceEase. T he Consumer Financial Protection Bureau (CFPB) has ordered two mortgage lenders to pay civil penalties for violating the Home Mortgage Disclosure Act (HMDA) due to allegedly inaccurate information from applications in 2011. According to a release from the agency, Mortgage Master (a nonbank headquartered in Walpole, Massachusetts) and Washington Federal (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 "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." —Richard Cordray, CFPB

Articles in this issue

Archives of this issue

view archives of TheMReport - You Deal With It