The Consumer Financial Protection Bureau (CFPB) ordered Nationstar Mortgage LLC to pay a $1.75 million civil penalty for violating the Home Mortgage Disclosure Act (HMDA) last week for flawed mortgage reporting. This was the largest HMDA penalty in the CFPB’s history.
The Home Mortgage Disclosure Act (HMDA) requires many financial institutions to maintain, report, and publicly disclose information about mortgages. The Dodd-Frank Act transferred HMDA rulemaking authority from the Federal Reserve Board to the CFPB on July 21, 2011.
As part of its supervision of larger banks and nonbank mortgage lenders, the CFPB reviews the accuracy of HMDA data and the adequacy of HMDA compliance programs. The CFPB said Nationstar failed to report accurate data about mortgage transactions for 2012 through 2014.
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.
Nationstar has a history of HMDA non-compliance. In 2011, the Commonwealth of Massachusetts Division of Banks reached a settlement with Nationstar to address HMDA compliance deficiencies. The samples reviewed by the CFPB showed substantial error rates in three consecutive reporting years, even after that settlement was reached. In the samples reviewed, the CFPB found error rates of 13 percent in 2012, 33 percent in 2013, and 21 percent in 2014.
“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.”
In addition to the $1.75 million penalty, Nationstar is required to develop and implement an effective compliance management system to prevent future violations. Nationstar must review, correct, and make available its corrected HMDA data from 2012–14.