CFPB Audit Issues

Why?The Consumer Financial Protection Bureau (CFPB) has now launched itself into the world of mortgage brokers, both pure brokers and correspondents. Three distinct problems are surfacing that are somewhat surprising given the compliance environment in which the industry operates. It is evident what the CFPB is encountering is consistent with what state regulators are also now experiencing.

Unlicensed Branches

Amazingly both federal and state regulators are finding these branches with regularity nationwide. For example regulators are discovering fully functional branch operations that have pending branch licenses not yet issued and unlicensed rogue operations trying to stay off the regulatory radar and avoid applying for the proper branch licenses as mandated.

Unlicensed Loan Officers

This is just not tolerated in any manner. Examples include loan officers in training interacting with borrowers before they are legally licensed quoting rates, terms and other financial numbers. This also includes loan officers originating a loan in a state in which they are not licensed. Putting the loan in a loan officer’s name that is properly licensed in that state, working the loan and receiving or splitting a commission. Regulators have found this practice pervasive and are closing these kind operations with these kinds of violations.

Lack of Responsiveness

This is a sure way to make sure that, at best, your audit turns into a nightmare. These violations include not responding audit requests on a timely basis and failing to complete and return regulatory questionnaires. These pre-audit inquiry sheets can be 30-40 pages loan and ask for a tremendous amount of information. Failing to return them or not answering any of the questions will usually result in an “office visit” from the regulator with a subpoena in hand. It all goes downhill from that day forward.

These issues are happening with too much regularity and will always end up in a predictable outcome. Regulators view the above issues as defiant arrogance and this is a battle you cannot win and would be foolish to fight.

If you have any questions concerning preparation for regulatory audits, being compliant, or the actual pending audit, do not hesitate to contact Mortgage Defense, Inc. at 704-584-0364.