March 17, 2015
CFPB Mortgage Supervision Highlights
The Consumer Financial Protection Bureau issued its Supervisory Highlights for Winter 2015. The highlights include a section on Mortgage Origination and “largely focuses on Supervision’s examination findings and observations from July 2014 to December 2014.” (9)
The headings of this section give a sense of the CFPB’s work in this area:
- Loan originators cannot receive compensation based on a term of a transaction
- Improper use of lender credit absent changed circumstances
- Failing to provide the Good Faith Estimate in a timely manner
- Improperly using advertisements with triggering terms without the required additional disclosures
- Adverse action notice deficiencies and failure to provide the notice in a timely manner
- Deficiencies in compliance management systems
For good or for ill, these are pretty modest examination findings. They certainly don’t reveal the fire-breathing regulator that some had prophesied. I was particularly interested in the last finding:
an effective compliance management system includes board and management oversight, a compliance program, a consumer complaint management program, and a compliance audit program. The board of directors and senior management should, among other things, adopt clear policy statements concerning consumer compliance, establish a compliance function to set policies and procedures, and assign resources to the compliance function commensurate with the size and complexity of the supervised entity’s practices and operations. A compliance program should include policies and procedures, training, and monitoring and corrective action processes. A compliance audit program should assist the board of directors or board committees in determining whether policies and standards adopted by the board are being implemented, and should also identify any significant gaps in board policies and standards. (13)
Compliance management systems are intended to create a culture of compliance within an organization, from top to bottom. The CFPB found that one or more financial institutions had weak compliance management systems that would allow for numerous violations of federal regulations governing mortgage lending. It is important for the CFPB to focus on these compliance issues now, before the mortgage market really froths up and carries mortgage professionals away from appropriate underwriting and servicing.
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