OCT 17, 2013

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Compliance Matters

CFPB FInes Two Lenders for HMDA Violations

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CFPB FINES NONBANK AND BANK FOR FILING BAD HMDA STATEMENTS

FACTS

On Oct. 9, the Consumer Financial Protection Bureau ordered Mortgage Master Inc. and Washington Federal to pay civil penalties for violating the Home Mortgage Disclosure Act. HMDA requires certain mortgage lenders to accurately collect and report data about home mortgage loans. Mortgage Master will pay $425,000 and Washington Federal, $34,000 in civil penalties.

Mortgage Master: According to the CFPB’s consent order, a CFPB exam found that Mortgage Master, a nonbank headquartered in Walpole, Mass., had significant data errors in the 21,015 mortgage loan applications it reported for 2011. CFPB collaborated closely in its subsequent investigation with the Commonwealth of Massachusetts Division of Banks, which had also identified significant error rates in Mortgage Master’s HMDA filings. The CFPB’s Consent Order is concurrent with a consent order from the Commonwealth of Massachusetts Division of Banks. Besides the civil penalty, Mortgage Master must correct and resubmit its 2011 HMDA data and develop and implement an effective HMDA compliance management system to prevent future violations.

Washington Federal: According to the CFPB’s consent order, a CFPB exam found that Washington Federal, a bank headquartered in Seattle, had significant errors in the 5,785 mortgage loan applications it reported for 2011. Washington Federal needs to take the same corrective actions that Mortgage Master is.

Since the CFPB’s discovery of the inaccuracies, both entities have been taking steps to improve their HMDA compliance management systems and the accuracy of their HMDA mortgage loan information.

The CFPB is also issuing a bulletin that puts the industry on notice about the importance of accurate HMDA data and effective HMDA compliance management systems. The bulletin provides transparency into how the CFPB enforces HMDA.

In assessing the different civil money penalties against Mortgage Master and Washington Federal, the CFPB considered the factors set forth in this bulletin, including, in particular, the size of each institution’s mortgage lending, their respective error rates, and each institution’s specific history of prior violations.

MORAL

Read, learn and go validate the HMDA report for 2011 to see if you measure up to being clear or being fined.  Better to spend money to review now and self correct if necessary rather than get hit with a much larger amount in a fine and still have to correct later.

APPELLATE COURT REVERSES INDYMAC FORECLOSURE JUDGEMENT

FACTS

 

In 1999, Angelica Chavez purchased a home in San Diego and refinanced a mortgage on the home in 2006. In November 2009, Chavez defaulted on the loan. She negotiated with Indymac for a home loan modification and Indymac offered her a modification agreement under the Home Affordable Mortgage Program. Chavez signed and returned the agreement, complied with its requirements, and made all necessary payments. However, the agreement required that Indymac send her a signed copy of the agreement, which it never did. 

Indymac later refused one of her payments, foreclosed on her property and forced Chavez to move. Chavez then filed a lawsuit against Indymac arguing that Indymac violated their agreement and wrongfully foreclosed on the property. Indymac responded that the “statute of frauds” applied and since the agreement had not been signed by Indymac there was no agreement. The trial court agreed and gave judgment to Indymac. Chavez appealed.

The 4th District Courts of Appeal said reversed. Under the statute of frauds, contracts that are covered by the requirements of the statute, such as modifications to mortgage agreements, have to be in writing and signed by any person who has obligations under the contract.  Although contracts that do not comply with these requirements are usually invalid, courts may apply other principles to prevent a party from using them to scam the contract’s other party. Here, Indymac argued that the mortgage modification was invalid under the statute of frauds because it was not signed. However, it was required to send Chavez either a signed copy of the modification agreement, or a notice that she did not qualify for it, but did neither. 

Given that Chavez justifiably believed that she qualified for the modification and acted accordingly, the Appellate Court concluded that principles of fairness required that Indymac not be allowed to use the statute of frauds to avoid enforcement of the loan modification agreement. The trial court ruling is incorrect. (Chavez v. Indymac Mortgage Services, 4th Dist. No. D0619967m 91513)

MORAL

Given that Indymac foreclosed and kicked her out I would say that Indymac is potentially looking at a lot of money in damages. Note that in addition to the two attorneys for the plaintiff there were four “amicus” attorneys (volunteers filing briefs as “friends of the court.”). I have heard a lot of stories similar to this and this is a good one to quote for those in modification situations that are similar.

COMPLAINTS TO THE CALIFORNIA BRE AND ACCUSATION FILINGS AGAINST LICENSEES WILL GO UP DRAMATICALLY STATES THIS ATTORNEY

FACTS

The Bureau of Real Estate has now set up an on-line complaint system for consumers. Go to http://enforcement.bre.ca.gov/eocs and review.  With consumers able to complain this way the likelihood of more licensees receiving calls from the BRE has improved dramatically.

If this is the case, I suggest you call us when the consumer complains to you first. By doing a simple telephone consultation about the consumer’s complaint we may be able to tell you how to best alleviate the problem before it goes to the BRE. Once the BRE has the complaint and you get the call, you should have the person submit the information to you in writing so there is no misunderstanding and then call us. Better preventative medicine than a serious operation on your license.

MORAL

Settle a dispute before it escalates. Remember it is your license you are protecting.

 

THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE. AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE.

 

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