HMDA – HUGE ERRORS, HUGE PENALTIES

Recently the Consumer Financial Protection Bureau (CFPB) ordered Nationstar Mortgage LLC, of Coppell, Texas, to pay a $1.75 million civil penalty for violating the Home Mortgage Disclosure Act (HMDA) by consistently failing to report accurate data about mortgage transactions for 2012 through 2014, and to take the necessary steps to improve its compliance management and prevent future violations. This is the largest HMDA penalty ever imposed by the CFPB.

According to 2014 data, Nationstar was the ninth-largest HMDA reporter by total mortgage originations, the sixth largest by applications received, and the 13th largest by money lent. From 2010 to 2014, Nationstar’s number of HMDA mortgage loans increased by nearly 900 percent. (Growing pains)

The CFPB found that Nationstar’s HMDA compliance systems were flawed, and generated mortgage lending data with significant, preventable errors. Nationstar also failed to maintain detailed HMDA data collection and validation procedures, and failed to implement adequate compliance procedures. It also produced discrepancies by failing to consistently define data among its various lines of business. Reporting samples reviewed by the CFPB showed substantial error rates in three consecutive reporting years, even after a settlement with the Massachusetts Division of Banks over faulty HMDA reporting was reached in 2011. In the samples reviewed, the CFPB found error rates of:

  • 13 percent in 2012;
  • 33 percent in 2013; and
  • 21 percent in 2014.

In addition to the civil monetary penalty the Consent Order also requires Nationstar to:

  • Make major revisions to its Compliance Plan:
  • Improve policies, procedures and internal controls;
  • Implement regular testing of HMDA data;
  • Improve training;
  • Develop an internal compliance audit program;
  • Expand board involvement;
  • Submit periodic progress reports; and
  • Maintain records.

A copy of the consent agreement is available at iles.consumerfinance.gov/f/documents/201703_cfpb_Nationstar-Mortgage-consent-order.pdf

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