Earlier this month, the Consumer Financial Protection Bureau (CFPB) levied fines of $34,000 against Washington Federal and $425,000 for compliance failures under the Home Mortgage Disclosure Act (HMDA). These actions, along with new HMDA compliance guidance, puts bank boards and senior management on notice that the CFPB is actively policing HMDA compliance. The CFPB, with its focus on consumer protection rather than safety and soundness, views the HMDA as critical to CFPB efforts to police compliance with the Equal Credit Opportunity Act and prevent discrimination in home mortgage lending.
The Home Mortgage Disclosure Act or HMDA requires certain lenders, including banks, thrifts, credit unions, and mortgage companies, to disclose information regarding home loan applications, including rejected applications. The HMDA has been around with some amendments since 1975, but the Dodd-Frank Act transferred enforcement authority for the HDMA from prudential regulators to the CFPB.
The recent enforcement actions are evidence of the importance of HMDA reporting to the CFPB’s mission. According to CFPB guidance, financial institutions must implement effective HMDA compliance programs, or be at risk for enforcement actions. As with all compliance programs, the financial institution’s board and senior management are responsible for setting the right “tone at the top,” establishing a compliance program designed to fit the institution’s individual size and risk profile, monitoring the program’s effectiveness, and periodically reviewing and updating the compliance program.