The Consumer Financial Protection Bureau (CFPB) recently announced a key initial step in implementing its Nonbank Supervision program — the publication of the Mortgage Origination Examination Procedures (MOEP). The procedures are a field guide for CFPB examiners looking at mortgage originators in both the bank and nonbank sectors of the industry.
The procedures are significant for two reasons:
- A lightly regulated segment of the mortgage market – independent lenders, brokers, servicers, and others unaffiliated with banks and depository institutions – are now subject to federal supervision. This “nonbank” mortgage sector included many of the largest subprime lenders during the housing bubble.
- These new procedures also apply to banks subject to CFPB supervision, and therefore are useful for those building an internal audit/review program for mortgage originations.
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 MOEP 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 new procedures are a companion piece to the Mortgage Servicing Examination Procedures, which the CFPB published in October 2011.
The Mortgage Origination Examination Procedures can be found at:
www.consumerfinance.gov/wp-content/uploads/2012/01/Mortgage-Origination-Examination-Procedures.pdf.