Some mortgage lenders have violated fair housing laws by discriminating against African Americans and women when granting pricing exceptions, according to a report from the Consumer Financial Protection Bureau.
The CFPB last week issued a report providing supervisory highlights from examinations during the first six months of 2021 and findings from previous years that have led to enforcement actions this year.
In addition to fair lending issues, examiners have also found practices by mortgage servicers that violated the CARES Act.
“[The] report reveals that irresponsible or mismanaged firms harmed Americans during the COVID-19 pandemic,” CFPB Director Rohit Chopra said in a statement last week. “We will continue to supervise firms to halt harmful practices before they become widespread.”
The Dodd-Frank Act gives the CFPB authority to supervise compliance with federal consumer financial law at large banks, thrifts, credit unions with assets over $10 billion and some nonbanks. The nonbanks include mortgage companies, private student lenders and payday lenders.
In several violations of the Equal Credit Opportunity Act (ECOA), the CFPB said, mortgage lenders had statistically significant disparities in granting pricing exceptions for African American and female applications compared to similar non-Hispanic white and male borrowers.
The CFPB noted that these lenders lacked oversight and control over how mortgage loan officers granted pricing exceptions to customers.
The CFPB also found issues with mortgage servicing, including violations related to the increase in mortgage forbearances due to the COVID-19 pandemic.
Examiners found that mortgage servicers charged borrowers late fees and fees related to defaults even though the CARES Act prohibited these fees for consumers receiving CARES Act forbearance. Mortgage servicers did not refund some of the fees until almost a year later, according to the report.
“These illegal fees exacerbated the economic hardships experienced by struggling homeowners in 2021,” the CFPB said.
Some mortgage servicers also overcharged borrowers for services or added fees outside of their loan terms, including for home inspections and broker price opinions.
Other violations involving mortgage servicers included:
- Failing to end preauthorized electronic fund transfers when an account had been closed, often resulting insufficient fund fees at borrowers’ bank accounts.
- Providing inaccurate descriptions of payments and transaction information in online accounts, which the CFPB said could mislead borrowers.
- Not reviewing borrowers’ applications for loss mitigation options within 30 days.
- Putting partial payments in borrowers’ escrow accounts rather than returning the amount or crediting it to the next monthly payment.
- Failing to automatically terminate private mortgage insurance (PMI) on time.
Other violations highlighted in the report involved auto loan servicing, small business lending, consumer reporting, debt collection, deposits, fair lending, private student loan origination, student loan servicing and payday lending.
Violations do not always lead to enforcement actions. The CFPB said examiners often find problems that are resolved with no enforcement action.
