OLYMPIA – The Washington State Department of Financial Institutions joins the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR) in announcing a 35-state settlement agreement (PDF)* in which CitiFinancial agreed to remit a $1.25 million penalty.
The agreement between CitiFinancial and state mortgage regulators was executed after an examination conducted by the Massachusetts Division of Banks to determine compliance with state and federal consumer protection laws. The examination found that CitiFinancial had failed to report 91,127 residential mortgage loans to the federal government, as required by the Home Mortgage Disclosure Act (HMDA). The mortgage loans that were omitted from CitiFinancial’s HMDA Loan Application Register (LAR) were originated between 2004 through 2007. According to CitiFinancial, the underreporting of the mortgage loans was caused by an internal systems error at CitiFinancial that went undetected until the Massachusetts examination. As 1,797 loans were originated here, Washington is expected to receive $32,816.18 of the penalty.
“State financial regulators are at the forefront of protecting borrowers from discriminatory lending practices. Reviewing this information yearly is one of DFI’s means of testing whether a company is treating our citizens fairly and not making discriminatory loans” Scott Jarvis, Director of DFI said. “It is simply not acceptable that this important information was not available for a period of years. “
Major terms of the agreement include:
- CitiFinancial already resubmitting corrected and complete HMDA reports to the Federal Reserve System for the years 2004 through 2007;
- CitiFinancial engaging an independent consultant to conduct a thorough fair lending review to ensure the data from the previously unreported 91,127 mortgage transactions does not in any way demonstrate a pattern or practice of discriminatory lending practices;
- CitiFinancial will thoroughly review and substantially modify its internal control procedures to ensure all reportable HMDA transactions are accurately compiled and reported; and
- CitiFinancial will remit a penalty totaling $1.25 million to the 35 states that are party to this agreement.
“This settlement is one in a long history of cases that highlights the value of state enforcement of federal consumer protection laws,” said Deborah Bortner, DFI Director of Consumer Services and AARMR Board member. “Cases like this demonstrate that state regulators can and do work together effectively to address compliance concerns with large national lenders.”
HMDA was enacted in 1975 and requires mortgage lenders to report certain data regarding mortgage loan transactions to the Federal Reserve System. The public data is principally used by regulators to measure how banks are meeting the credit needs of the communities in which they do business and determine whether patterns of potentially discriminatory lending practices are present. Each lender must submit data fields for each mortgage loan application it receives including the following: the loan amount; the location of the property; the race, ethnicity, and gender of the borrower(s); and the action taken on the application (whether the loan was approved or denied).
The 35-State mortgage regulators included in this settlement agreement are:
- Alabama State Banking Department
- Arizona Department of Financial Institutions
- Connecticut Department of Banking
- Delaware Office of the State Bank Commissioner
- Georgia Department of Banking and Finance
- Hawaii Division of Financial Institutions
- Idaho Department of Finance
- Illinois Department of Financial Professional Regulation-Division of Banking
- Indiana Department of Financial Institutions
- Iowa Division of Banking
- Kentucky Department of Financial Institutions
- Louisiana Office of Financial Institutions
- Maine Bureau of Consumer Credit Protection
- Maryland Office of Financial Regulation
- Massachusetts Division of Banks
- Michigan Office Financial and Insurance Regulation
- Mississippi Department of Banking and Consumer Finance
- Montana Division of Banking and Finance
- Nebraska Department of Banking and Finance
- New Hampshire Banking Department
- New Jersey Department of Banking and Insurance
- New Mexico Financial Institutions Division
- New York State Banking Department
- North Carolina Office of the Commissioner of Banks
- Ohio Division of Financial Institutions
- Oregon Division of Finance & Corporate Securities
- Pennsylvania Department of Banking
- Rhode Island Department of Business Regulation
- Tennessee Department of Financial Institutions
- Texas Department of Savings and Mortgage Lending
- Utah Department of Financial Institutions
- Vermont Department of Banking, Insurance, Securities and Health Care Administration
- Virginia Bureau of Financial Institutions
- Washington Department of Financial Institutions
- West Virginia Division of Banking