CFPB Comes Knocking for Mortgage Lenders, Lawyers In Tow

What the Consumer Financial Protection Bureau is looking for in its mortgage industry audits has  been a question since the bureau took effect. As they start we are beginning to see hints of what will be part of the inspection process.

It has been just four months since the CFPB got its director, and along with him, the ability to examine non-banks, but it has begun to visit mortgage companies of all shapes and sizes as part of its examination practice. Most important, say those familiar with the exams: preparation.

Many mortgage lenders have never had this type of examination.  It can be very intense and it is important that you understand what they want and what they are looking for.

Manned with plenty of enforcement staff, the CFPB is also making the rules, leaving little room for gray area. Lenders are left to walk a fine line between working with the agency to resolve potential issues while not opening themselves up for enforcement action if they are in the process of trying to maintain or improve compliance.

Another issue, sources close to the exams say is that there is often an enforcement lawyer present from the CFPB, with one assigned to each exam team. This has been confirmed by companies already dealing with an exam.

The CFPB is interested in looking at policies and procedures. Under that part of the exam, the agency will look at things like compliance management, customer complaint intake and response and anything that will indicate whether the company has procedures in place to manage compliance as well as the “culture” of compliance.

They’re looking at loan files, interviewing staff, looking at any complaints, even calling to interview complaining borrowers

It would benefit any institution to hire someone to help prepare for the CFPB exam by reviewing Policy & Procedures, doing a pre-audit and looking at Fair Lending practices.

The big issue currently on the table is fair lending. CFPB has purblished statements on this being a focal point and recently commenting on disparate impact.

Cognitive Options Group can help you prepare, contact us today.