The Only Constant Is Change - Except for Regulatory Compliance!
By: Bill Dolan, CMB, AMP
Change is everywhere these days. We have a new Administration, a new interim Director of the CFPB, and the statement above portrays just how life and everything in it is subject to transformation.
Some things remain fixed however, and like it or not, regulatory compliance as we all know, never goes away. The need to adhere to governing bodies is a constant and an ongoing responsibility for banks, credit unions, and mortgage companies alike. Regulations are constantly evolving and must be regularly monitored and maintained as new regulations are introduced while existing regulations are often “tweaked” or revamped. As lenders, you are required to adhere to these ongoing adjustments by being vigilant and compliant. A case in point:
The CFPB acted against several HMDA reporters last year, but especially in the last several months for inaccurate reporting of HMDA data. In one such case, the CFPB imposed a monetary penalty ($12 million) after finding that employees failed to ask mortgage applicants certain demographic questions and falsely reported that applicants chose not to respond. It is clear that enforcement actions, reputational risk, and potentially excessive fines and penalties are at risk for all.
It is also noteworthy that the CFPB often performs additional follow-up HMDA reviews to institutions found in violation. These reviews can force you to allocate additional time and resources to what would normally be distributed to HMDA data scrubbing and reporting still resulting in additional actions and penalties to the HMDA lender. Most recently, the CFPB filed a proposed order against a non-bank mortgage lender identifying them as a repeat offender and on top of the large civil monetary penalty ($3.95 million) imposed, the CFPB indicated that they would also require the mortgage company to retain the services of a qualified third-party independent firm to perform the following:
· HMDA data transaction testing
· Root cause analysis for each error identified by the testing and,
· Quarterly written transaction test reports describing the methodology used in summarizing the HMDA transaction tests and results, including errors identified, error rates per data field, the root cause of the errors, and all actions taken to prevent recurrences of the error(s).
Let’s face it, HMDA data collection and reporting is challenging, and the importance of accurate data is critical. Errors exceeding tolerance can result in data resubmissions, examination delays, regulatory violations, and, as evidenced above, civil monetary penalties.
For all HMDA reporting, management is responsible for ensuring that procedures are in place to collect and maintain accurate data regarding each loan application, loan origination, and loan purchase that must be reported. Both your Board of Directors and management also need to ensure that your institution provides those individuals assigned responsibility for preparing and maintaining the data against your source documents, the appropriate training regarding the regulatory requirements, resources, and tools needed to report complete and accurate HMDA data.
Uncomfortable or unsure whether your staff is thoroughly proficient in this area? SCA’s team of expert HMDA analytics specialists work with institutions to provide you with a far more efficient way to review your HMDA loan application registers (LARs) against your source documents. This enables your HMDA team to seamlessly collaborate with SCA to validate your data, resulting in a clean HMDA LAR being filed and sent to the CFPB for a final submission confidently.
Contact Bill Dolan at (617) 694-2617 or by email at: Wdolan@scapartnering.com to learn of SCA’s full array of consulting and fulfillment services that we offer our lenders throughout the country. Visit our website for the most up-to-date industry and product information.
