Last month, the CFPB began using new templates for its examination reports and supervisory letters (collectively, “reports’). The template changes were announced in the CFPB’s Winter 2013 Supervisory Report, which highlights supervision work completed between July and October 2013.
CFPB examiners (who numbered approximately 320 as of January 2, 2014) began using the new templates for exams with an on-site start date of January 2, 2014 or later. Examiners can also use the new templates for exams started before that date if drafting of a report started after that date. According to the CFPB, the main template changes were:
Elimination of recommendations, with any recommendations for improving currently satisfactory processes to be provided orally when examiners are on-site
Elimination of the list of CFPB team members participating in an exam, with reports to be signed by the examiner in charge and include regional contact information
Creation of a single section to be referred to as “Matters Requiring Attention,” that includes all items the CFPB expects the entity to address when the exam identifies violations of law or weaknesses in compliance management regardless of whether the CFPB is requiring specific attention by an entity’s board of directors
In addition to describing several highly publicized public enforcement actions, the report states that non-public supervisory actions resulted in at least $2.6 million in remediation to consumers. The non-public actions were generally the product of CFPB exams, either through examiner findings or self-reported violations during an exam. The recent non-public actions have occurred in areas such as mortgage origination and servicing.
The latest supervisory highlights report, as did the Summer 2013 Supervisory Highlights, focuses on deficiencies in mortgage servicing at both banks and nonbanks. The report notes that deficiencies it identifies relate to practices under pre-existing law, before the January 10, 2014 effective date of the CFPB’s new mortgage servicing rules. Those deficiencies concerned servicing transfers, waivers of rights in loss mitigation agreements, payment processing, furnishing information to consumer reporting agencies, and miscellaneous issues relating to defaulted loans of military and other borrowers. In general, the deficiencies cited in the report were deemed to violate the Dodd-Frank prohibition of unfair, deceptive or abusive practices rather than a specific legal requirement.
Given the diligence with which industry has been working to comply with the requirements of the new rules, we were disappointed that the CFPB did not acknowledge the progress it undoubtedly saw when conducting its supervisory work. We hope the CFPB’s next supervisory highlights report will include such an acknowledgement, and reflect Director Cordray’s repeated statements that that the CFPB would not expect immediate perfect compliance and instead would be looking at whether companies were making a good faith effort to comply with the new servicing and other mortgage rules.