WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) today announced a key initial step in implementing its Nonbank Supervision program — the publication of the Mortgage Origination Examination Procedures. These procedures are a field guide for CFPB examiners looking at mortgage originators in both the bank and nonbank sectors of the industry.
“The mortgage market cannot work well for consumers if the spotlight shines only on one part of it, while the rest is left in darkness,” said CFPB Director Richard Cordray. “Our supervision program will illuminate the entire marketplace by making nonbanks play by the same rules as the banks.”
Until now, a significant part of the mortgage market — which includes independent lenders, brokers, servicers, and others unaffiliated with banks and depository institutions — has not been subject to federal supervision. This “nonbank” mortgage sector included many of the largest subprime lenders during the housing bubble. The Dodd-Frank Wall Street Reform and Consumer Protection Act significantly reformed the gaps in federal supervision of the mortgage market by providing the CFPB with authority to supervise a range of mortgage participants.
These product-specific procedures are an extension of the CFPB’s general Supervisory and Examination Manual. The Mortgage Origination Examination Procedures outline the CFPB’s supervisory approach to ensure mortgage originators — lenders and brokers — comply with federal consumer financial laws. In particular, the Mortgage Origination Examination Procedures describe the types of information that the agency’s examiners will gather to evaluate mortgage originators’ policies and procedures, assess whether originators are in compliance with applicable laws, and identify risks to consumers throughout the mortgage origination process. The examination manual tracks key mortgage originator activities, from initial advertisements and marketing practices to closing practices.
The CFPB also will supervise nonbank mortgage servicers. In October, the CFPB published its Mortgage Servicing Examination Procedures, and the CFPB’s examiners will use these procedures to examine both nonbank and bank servicers.
The CFPB will be implementing its nonbank mortgage supervision program based on its assessment of risk to consumers, including consideration of factors such as the volume of business, types of products or services, and the extent of state oversight. The CFPB will also be coordinating with federal and state regulators in order to maximize overall supervisory capability and minimize regulatory burden.
In general, CFPB supervision activities will include gathering reports from and conducting examinations of supervised entities. The examination process will be an ongoing process of pre-examination scoping and review of information, data analysis, onsite examinations, and regular communication with supervised entities, as well as follow-up monitoring. When necessary, examiners will coordinate and work closely with the CFPB’s enforcement staff to take appropriate enforcement actions to address harm to consumers.
The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.