Consumer financial services: The road ahead

Mortgage origination and servicing

In 2018, the CFPB issued multiple rules, and Congress passed legislation, to clarify, revise and update the regulatory framework applicable to the home mortgage origination and servicing market.

It is illegal for home lenders and banks to discriminate against applicants—and it sets city blocks and whole neighborhoods back. [W]e need to hear from consumers who believe they’ve been victimized in the home lending and banking industries so we can hold those responsible accountable.”
Pennsylvania Attorney General Josh Shapiro1


Home Mortgage Disclosure Act (HMDA)

Section 104(a) of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA), which became law in May 2018, amended HMDA with the intent of decreasing the compliance burdens of smaller depository institutions.  The EGRRCPA also requires the Government Accountability Office (GAO) to submit a report to Congress by May 2021 evaluating the impact of the EGRRCPA’s changes on the amount of data available under HMDA.

In August 2018, the CFPB issued an interpretive and procedural rule to implement and clarify certain of the EGRRCPA’s changes to HMDA.4 Notably, the rule clarifies that insured depository institutions and insured credit unions covered by a partial exemption under the EGRRCPA have the option to report exempt data fields, provided they report all data fields within any exempt data point for which they report data.5 In addition, the rule clarifies that only loans and lines of credit that are otherwise HMDA-reportable count toward the thresholds for the partial exemptions.6 The Bureau also updated its Filing Instructions Guideand Small Entity Compliance Guide8 to reflect the EGRRCPA changes. In addition, in December 2018, the Bureau issued final policy guidance describing modifications it intends to apply to the HMDA data reported by financial institutions under HMDA and Regulation C before making such data available to the public at the loan level.9

The Bureau is currently considering amendments to Regulation C to address institutional and transactional coverage tests and discretionary data points, along with other changes to reduce the regulatory burden for mortgage-related activities.10 We expect the CFPB to issue a notice of proposed rulemaking, which would likely incorporate the August 2018 rule and further implement certain EGRRCPA provisions, by as early as spring 2019.11

We’re not [revising HMDA requirements] to undermine the consumer confidence in the system. We're actually doing it to help the marketplace. That’s what we are told to do in the statute.”
Former CFPB Acting Director Mick Mulvaney2


Truth in Lending Act (TILA)

In March 2018, the CFPB also finalized an amendment to its 2016 mortgage servicing rule to clarify and, as of April 19, 2018, afford mortgage servicers more latitude in providing periodic statements to consumers entering or exiting bankruptcy.12

Section 101 of the EGRRCPA created a safe harbor under the qualified mortgage and ability to pay (ATR/QM) rule for certain mortgage loans originated by a depository institution or credit union with less than US$10 billion in total consolidated assets.13 The EGRRCPA also amended TILA to specify that mortgage appraisal services donated by a fee appraiser to an organization eligible to receive tax-deductible charitable contributions are deemed to be customary and reasonable and that a retailer of manufactured housing that meets certain requirements is generally not a “mortgage originator” subject to TILA requirements.14

In September 2018, the Office of the Comptroller of the Currency (OCC) issued an updated TILA booklet of its Comptroller’s Handbook.15 The booklet replaces a 2014 version and includes updated guidance and procedures to OCC examiners in connection with changes made to Regulation Z. In January 2019, the Bureau issued a five-year lookback report on the ATR/QM rule, as well as a five-year lookback report on its Real Estate Settlement Procedures Act (RESPA) servicing rule.16

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"Know-Before-You-Owe" mortgage disclosure

In April 2018, the CFPB finalized an amendment to its TILA-RESPA integrated disclosure (TRID) rule to address the so-called “black hole” issue that prevented creditors from resetting tolerance (i.e., the percentage by which the amount ultimately paid by the customer is permitted to exceed the estimated amount), except in very limited circumstances.17 The April 2018 rule permits a creditor to reset these tolerances through closing disclosures regardless of the number of days between consummation and the required delivery date of the closing disclosure, provided that the creditor delivers the revised closing disclosure within three business days after receiving information sufficient to establish that a triggering event has occurred.18

In January 2019, the CFPB issued frequently asked questions and accompanying responses (FAQs) concerning the TRID rule. Three of the FAQs address the issuing of corrected closing disclosures and the three business-day waiting period before consummation, and the fourth states that lenders can rely on a safe harbor when using CFPB model disclosures, even if the model disclosures do not reflect recent rule changes.19 We also expect the CFPB to provide guidance pursuant to Section 109(b) of EGRRCPA on the applicability of the TRID rule to mortgage assumption transactions and construction-to-permanent home loans, and the conditions under which such loans can be properly originated.

mortgage-related complaints received each month by the CFPB since November 201642



The CFPB brought far fewer enforcement actions, including in the mortgage space, in 2018 than in 2017. After several months without initiating an enforcement action, the Bureau announced, in April 2018, a joint enforcement action with the OCC in which it reached a US$1 billion settlement with a major US financial institution for activities that included alleged mortgage servicing abuses, including improperly charging fees to borrowers for mortgage interest rate-lock extensions.20 As discussed below, multiple states and the District of Columbia reached a settlement with the same institution for related conduct.

In December 2018, the CFPB filed a complaint alleging that a loan company that offered a product to veterans with a loan guaranteed by the Department of Veterans Affairs to refinance their mortgages at lower interest rates, engaged in deceptive conduct by misleading customers by overstating the benefits of such refinancing.21 The settlement provides that the company will pay approximately US$270,000 in consumer redress and a civil penalty of US$260,000.22

Another notable enforcement action concerning alleged improper mortgage servicing practices remained pending throughout 2018. The Bureau filed a lawsuit against a leading nonbank mortgage servicer in 2017 for allegedly failing to provide routine servicing functions, including making widespread errors and runaround costs, failing to send accurate monthly statements, illegally foreclosing on struggling borrowers, ignoring customer complaints and selling off the servicing rights to loans without fully disclosing the mistakes it made in borrowers’ records. Litigation is ongoing in the United States District Court for the Southern District of Florida.23

The CFPB reported that from November 2016 through October 2018, mortgage products were the source of 11 percent of consumer complaints to the Bureau,24 down from 18 percent in 2016.25 Despite this reduction, we anticipate that the CFPB will continue to scrutinize the mortgage area, and in particular mortgage servicing practices. The most common source of consumer complaints was the payment process, including late or inaccurate periodic statements, servicers not applying payments to loan accounts as intended, escrow analyses showing a shortage of funds and payoff information requests that were not addressed or were inaccurate.26

The Bureau highlighted mortgage servicing as a top supervisory issue, and in particular, the loss mitigation process and how servicers handle trial modifications where consumers are paying as agreed.27 The Bureau noted that mortgage servicing examinations observed unfair acts or practices relating to conversion of trial modifications to permanent status and initiation of foreclosures after consumers accepted loss mitigation offers.28 In addition, examinations identified unfair acts or practices when institutions charged consumers amounts not authorized by modification agreements or mortgage notes.29

In 2017, the Department of Justice (DOJ) reached several settlements with banks and nonbank mortgage companies, as well as with a service provider to a nonbank mortgage company, under the False Claims Act (FCA) and the Fair Housing Act (FHA). As in recent years, the DOJ in 2018 frequently proceeded through joint actions with the Department of Housing and Urban Development. These enforcement efforts primarily focused on origination and servicing violations in connection with FHA-insured loans, as well as discriminatory lending practices. Such efforts notably included:

  • In October 2018, the DOJ obtained a US$13.2 million settlement with a mortgage company for allegedly violating the FCA by falsely certifying that it had complied with FHA mortgage insurance requirements in connection with certain loans.30
  • In May 2018, the DOJ reached a settlement with a Minnesota bank to resolve allegations that the bank had engaged in lending discrimination by “redlining” predominantly minority neighborhoods.31
  • In February 2018, the DOJ reached a US$149.5 million settlement with a firm that served as the outside auditor of a mortgage loan originator that had engaged in a fraudulent scheme involving the purported sale of fictitious or double-pledged mortgage loans. The DOJ alleged that the auditor knowingly deviated from applicable auditing standards and therefore failed to detect the mortgage originators’ fraudulent conduct and resulting materially false and misleading financial statements.32

$200.7 billion
in mortgages originated since the CFPB creation43


Fintech outlook

Fintechs in the mortgage origination and servicing space have focused on developing software to assist mortgage lenders in complying with HMDA disclosure requirements and performing real-time audits of the entire mortgage origination process to reduce cost and risk exposure. Fintechs have also developed AI-based scoring algorithms used to evaluate alternative data sources and assess mortgage seekers’ creditworthiness, as well as provide more accurate mortgage origination pricing and rates.

In addition, many fintech and traditional mortgage lenders have digitized all or a portion of the mortgage origination process. In 2017, 43 percent of mortgage customers applied for a mortgage digitally, up from 28 percent in 2016.33  While many lenders now offer digital applications, fewer have digital capabilities through the full back end of the loan process.34 The transition to a fully digitized process, in which electronic mortgage notes replace paper notes, is currently challenged by the refusal of Ginnie Mae and the federal home loan banks to accept electronic notes.35

Research by the Federal Reserve Bank of New York suggests that the market share of fintech mortgage lenders increased from two percent to eight percent from 2010 to 2016. The research also indicates that fintech lenders process mortgage applications approximately ten days faster than traditional lenders, without increasing the credit risk of loans. As in other market segments, these tech-based solutions may raise novel and significant, fair lending considerations.


State spotlight

Against the backdrop of decreased CFPB enforcement actions and statements by former Acting Director Mulvaney, that states should take the lead in enforcing consumer protection laws, states continued to focus on mortgage origination and servicing in 2018.36

In December 2018, all 50 states and the District of Columbia reached a settlement with a major financial institution for, among other things, alleged mortgage servicing abuses that include improperly charging fees to borrowers for mortgage interest rate-lock extension.37

In another notable action, Maryland’s Consumer Protection Division and Commissioner of Financial Regulation entered into a settlement agreement in May 2018 with a large nonbank servicer of residential mortgages that allegedly charged homeowners illegal inspection fees. As a result of the investigation and settlement, the servicer returned to consumers approximately US$1 million in fees and paid a fine of approximately US$500,000.38 In April 2018, the New York Department of Financial Services (NYDFS) announced that it reached a settlement in excess of US$17 million with a large nonbank mortgage servicer for alleged violations of New York banking law, including document retention and document management processes that demonstrated significant flaws, as well as failure to fund mortgage loans within the required timeframe.39

Several states established or revised requirements that nonbank companies engaging in mortgage lending and/or mortgage servicing must obtain a state license, joining others that took similar action in 2017.40  In August 2018, the Conference of State Bank Supervisors (CSBS) announced that all US state and territories now use a single, common exam to assess mortgage loan originators (MLOs), simplifying the licensing process for MLOs. A mortgage license applicant that passes the national test will not be required to take any additional state-specific tests to hold a license with a US state or territory.41


2019 outlook

  • Further rulemaking is forthcoming in the HMDA/Regulation C area to address institutional and transactional coverage tests and discretionary data points and other changes to reduce the regulatory burden for mortgage-related activities.
  • We expect the CFPB to provide guidance on the applicability of the TRID rule to mortgage assumption transactions, construction-to-permanent home loans and the conditions under which such loans can be properly originated, and the extent to which lenders can rely on CFPB model disclosures without liability, if recent changes to regulations are not reflected in the Bureau’s forms.
  • In light of the focus on mortgage origination and servicing and other consumer protection issues by state regulators in 2018, we expect the announcement of additional state-level enforcement actions throughout 2019.


Consumer financial services: The road ahead


1 Press Release, Attorney General Shapiro Puts Spotlight on Redlining (Oct. 22, 2018),
2 Kate Berry, CFPB's Mulvaney Plots HMDA Rollback, But it May Not Matter, American Banker (May 25, 2018),
3 Pub. L. 115-174 (Economic Growth, Regulatory Relief and Consumer Protection Act) (May 24, 2018), EGRRCPA exempts from certain reporting requirements: (i) with respect to closed-end mortgage loans, insured depository institutions and insured credit unions that originated fewer than 500 closed-end mortgage loans in each of the two preceding calendar years, and (ii) with respect to open-end lines of credit, insured depository institutions and insured credit unions that originated fewer than 500 open-end lines of credit in each of the two preceding calendar years.
4 CFPB, Partial Exemptions from the Requirements of the Home Mortgage Disclosure Act under the Economic Growth, Regulatory Relief, and Consumer Protection Act (Regulation C) (Aug. 30, 2018),
5 Id. at 2.
6 Id.
7 CFPB, Filing Instructions Guide for HMDA Data Collected in 2018 (Sept. 2018),
8 CFPB, Home Mortgage Disclosure (Regulation C) Small Entity Compliance Guidance (Oct. 2018),
9 CFPB, Disclosure of Loan-Level HMDA Data (Dec. 20, 2018),
10 CFPB, Semiannual Regulatory Agenda: Home Mortgage Disclosure Act (Regulation C) (Fall 2018),
11 CFPB, Bureau of Consumer Financial Protection Issues Rule to Implement and Clarify New HMDA Amendments (Aug. 31, 2018),
12 CFPB, Mortgage Servicing Rules under the Truth in Lending Act (Regulation Z) (Mar. 6, 2018),
13 Pub. L. 115-174 (Economic Growth, Regulatory Relief, and Consumer Protection Act) (May 24, 2018),
14 Id. at Section 102.
15 OCC, Controller's Handbook: Truth in Lending Act, Version 2.0 (Sept. 2018),
16 CFPB, Ability-to-Repay and Qualified Mortgage Rule Assessment Report (Jan. 2019),; CFPB, 2013 RESPA Servicing Rule Assessment Report (Jan. 2019),
17 CFPB, Federal Mortgage Disclosure Requirements under the Truth in Lending Act (Regulation Z) (Apr. 26, 2018),
18 Id. at 12-13.
19 CFPB, TILA-RESPA Integrated Disclosure FAQs (Jan. 25, 2019),
20 CFPB, Consent Order in the Matter of Wells Fargo Bank, N.A., 2018-BCFP-0001 (Apr. 20, 2018), This enforcement action is discussed further in White & Case's 2018 edition of Consumer Financial Services at a Crossroads,
21 Consumer Fin. Prot. Bureau v. Vill. Capital & Inv, et al., case no. 2:18-cv-02304 (D. Nev. Dec. 4, 2018),
22 Consumer Fin. Prot. Bureau v. Vill. Capital & Inv, et al., case no. 2:18-cv-02304 (D. Nev. Dec. 4, 2018),
23 Consumer Fin. Prot. Bureau v. Ocwen Fin. Corp., et al., case no. 9:17-cv-80495 (S.D. Fla. Apr. 20, 2017),
24 CFPB, Complaint Snapshot: Mortgage, at 10 (Jan. 2019),
25 CFPB, Complaint Snapshot: 50 State Report (Oct. 2018),
26 CFPB, Complaint Snapshot: Mortgage at 12,
27 CFPB Supervisory Highlights, Issue 17 (Summer 2018), at 7-10,
28 Id.
29 Id.
30 DOJ, Universal American Mortgage Company LLC (UAMC) Agrees to Pay $13.2 Million to Resolve False Claims Act Allegations Related to Loan Guarantees (Oct. 19, 2018),
31 DOJ, Justice Department Reaches Settlement with Minnesota Bank to Resolve Allegations of Lending Discrimination (May 8, 2018),
32 DOJ, Deloitte & Touche Agrees to Pay $149.5 Million to Settle Claims Arising From Its Audits of Failed Mortgage Lender Taylor, Bean & Whitaker (Feb. 28, 2018),
33 J.D. Power, Despite a Rise in Use of Digital, Mortgage Customer Satisfaction Declines, J.D. Power Finds (Nov. 9, 2017),
34 Treasury, A Financial System That Creates Economic Opportunities: Nonbank Financials, Fintech, and Innovation, at 102-103 (July 2018),
35 Id.
36 John Vong, A Little Less Regulation from the CFPB, a Little More Action from the States, Housing Wire (Aug. 16, 2018),
37 Settlement Agreement, by and among Wells Fargo Bank, N.A. and the Various Attorneys General (Dec. 28, 2018),
38 Attorney General of the State of Maryland, Press Release (May 14, 2018),
39 NYDFS, Consent Order Pursuant to New York Banking Law § 44 (Apr. 11, 2018),
40 These states include California, Ohio, Oregon, Maine, Pennsylvania, and Washington. As of August 2018, 46 states required nonbank companies to have a specific license for mortgage servicing. See
41 CSBS, State Regulators Nationwide Adopt Single Exam for Mortgage Licensing (Aug. 8, 2018),
42 CFPB, Complaint Snapshot: Mortgage (January 2019),
43 CFPB Consumer Credit Panel, Mortgage Origination Activity,



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