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CFPB Slams Nationstar with Record $1.7 Million Fine

The Consumer Financial Protection Bureau on Wednesday announced a record penalty levied against Nationstar Mortgage LLC over a host of Home Mortgage Disclosure Act (HMDA) reporting errors stretching back to 2012.

Under the order, the Coppell, Texas-based mortgage lender and servicer will pay a fine of $1.75 million to the CFBP’s Civil Penalty Fund, fix discrepancies in its historical HMDA reporting, and develop a new compliance plan to head off any future mistakes.

“Today’s action is the largest HMDA civil penalty imposed by the Bureau to date, which stems from Nationstar’s market size, the substantial magnitude of its errors, and its history of previous violations,” the CFPB said in a statement released to the media Wednesday.

Under the HMDA of 1975, lenders are required to provide specific data about their mortgage lending practices to both the government and the public, with the rationale that various public and private entities can then track lending patterns in their communities — both to monitor potential discrimination and identify areas of potential investment.

The CFPB alleged that Nationstar made “significant, preventable errors” in its HMDA reporting from 2012 to 2014, with error rates as high as 33% in 2013. The bureau also noted that Nationstar had entered into a settlement with the Massachusetts Division of Banks to resolve similar HMDA reporting issues back in 2011.

In the full text of its order, the CFPB implied that the errors may have been the result of Nationstar’s recent rapid expansion: Between 2010 and 2014, the amount of loans subject to HMDA requirements in Nationstar’s portfolio ballooned by almost 900%, the CFPB said.

The complaint and penalty did not specifically call out reverse mortgages; the firm services Home Equity Conversion Mortgages through its Champion Mortgage arm, and also issues HECM-backed securities. In 2016, Nationstar came in seventh place among all HMBS issuers, with 137 pools created for a total of $412 million in HMBS issuance, according to data from New View Advisors.

Earlier this year, Nationstar’s reverse mortgage servicing operation made headlines in the industry and beyond after the Wall Street Journal reported an investigation into Champion — along with OneWest Bank’s Financial Freedom arm — by New York State Attorney General Eric Schneiderman. Citing “a person familiar with the matter,” the WSJ reported that the attorney general’s office was launching a probe into whether Champion and Financial Freedom inappropriately strong-armed HECM borrowers into foreclosures.

“Financial institutions that violate the law repeatedly and substantially are not making serious enough efforts to report accurate information,” CFPB director Richard Cordray said in a statement. “Today, we are sending a strong reminder that HMDA serves important purposes for many stakeholders in the mortgage market, and those required to report this information must make more careful efforts to follow the law.”

Written by Alex Spanko