the Consumer Financial Protection Bureau (CFPB) is tightening the screws on mortgage agents and originators who violate consumer protection laws.
The monitoring agency discovered that lenders were engaging in deceptive marketing practices, including violations of the Truth in Loans Act and Equal Credit Opportunity Act, and provided inaccurate data on mortgage loans. The agency did not name the lenders or services it examined and did not impose any fines or penalties.
The CFPB said a lender – who set off red flags when it received fewer requests from minority neighborhoods – has engaged in a “redlining”. In the lender’s direct marketing and open house materials, the models were white. The lender’s offices were concentrated in white neighborhoods and almost all of its loan officers were white. The CFPB also found that loan officers sent internal emails “containing racist and derogatory content”.
The lender will take steps to correct the violations, which the CFPB is still reviewing.
The CFPB also identified “widespread errors” in the disclosure of lender data. Financial institutions have ignored the credit rating, credit spread, and debt-to-income data fields in their mortgage disclosure law. These institutions will have to correct and resubmit their disclosures.
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In some cases, the CFPB has found that lenders compensate loan originators differently depending on the type of product – a violation of the Truth in Lending Act. Lenders have given less compensation for bond loans subject to the requirements of a public housing finance agency.
The watchdog found that mortgage agents violated Regulation X, which requires lenders to provide borrowers with timely information about the real estate settlement process, by filing a foreclosure request when prohibited.
In some cases, maintenance workers distorted the foreclosure schedule to borrowers. Service agents have sent letters to borrowers saying they will not take foreclosure action until a specified date. However, they started the seizures before that date.
“Misrepresentations about when the foreclosure action would be triggered were likely to mislead borrowers into believing they had more time until foreclosure than they actually had,” notes the report.
The agency also found that mortgage agents launched foreclosures after borrowers appealed a decision on a loss mitigation application. Duty officers initiated the foreclosures before making a decision on the appeals one way or another.
Some mortgage agents did not ask legal counsel to end the foreclosure process until five days after receiving a loss mitigation request from borrowers.