This week, the Consumer Financial Protection Bureau entered into a consent order with Nationstar Mortgage that will require the lender to pay $1.75 million into the bureau’s Civil Penalty Fund. In addition, Nationstar has agreed to improve their compliance program. Nationstar expressed “regret” for the mistakes that led to the CFPB action. The consent order can be found here.
Nationstar is accused of violating the Home Mortgage Disclosure Act of 1975, which requires companies to disclose information regarding mortgage loans, home improvement loans and refinance loans that they originate or purchase, or for which they receive applications. HMDA also requires financial institutions to report to the appropriate federal agencies and make loan data available to the public.
Regulators utilize this data in determining compliance with other mortgage-related laws such as the Equal Credit Opportunity Act, the Fair Housing Act and the Community Reinvestment Act. And according to the CFPB, Nationstar did not fulfill its HMDA reporting obligations.
“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.”
According to the CFPB, Nationstar’s compliance systems were “flawed and generated mortgage lending data with significant, preventable errors.” The CFPB claims that Nationstar “failed to maintain detailed HMDA data collection and validation procedures, and failed to implement adequate compliance procedures.” The company also “produced discrepancies by failing to consistently define data among its various lines of business,” the CFPB said.
The consent order notes that Nationstar “has a history of HMDA non-compliance,” including a 2011 settlement in Massachusetts over HMDA compliance deficiencies. According to the CFPB, the samples it reviewed showed “substantial error rates” in three consecutive reporting years, with error rates of 13% in 2012, 33% in 2013, and 21% in 2014.
The Nationstar fine is the largest HMDA civil penalty ever imposed by the CFPB. The size of the fine is based on “Nationstar’s market size, the substantial magnitude of its errors, and its history of previous violations” of HMDA relating to mortgage transactions from 2012 through 2014. The bureau noted that Nationstar serves more than 3 million customers, and its number of mortgage loans has increased 900 percent since 2010.