Top 3 Mortgage Marketing Compliance Enforcement Actions of 2022

Discrimination and redlining in majority-minority neighborhoods

Compliance Issue: Fair lending and redlining

Regulatory Agency: Consumer Financial Protection Bureau (CFPB) and Department of Justice (DOJ)

Total Penalty Amount: $22M

Summary: The CFPB and DOJ took action against a mortgage company for intentionally discriminating against majority-minority neighborhoods. The investigation found that the company distributed racist language and messages about certain neighborhoods, avoided sending loan officers to majority-minority areas, and ran marketing campaigns that discouraged and ignored minority applicants.

Enforcement Action: The mortgage company must pay an $18.4 million loan subsidy program, a $4 million fine, and spend an additional $2 million on advertising to generate applications in the redlined areas and other steps to serve the credit needs of majority-minority neighborhoods

Takeaway: Mortgage companies should take steps to ensure that their marketing efforts do not violate fair lending laws. This includes monitoring their marketing materials for any content that could be perceived as discriminatory or biased, and ensuring that marketing efforts are targeted equally to all neighborhoods, regardless of their racial or ethnic composition. Companies should also monitor their loan officers' actions to ensure that they are serving all customers fairly, regardless of the neighborhoods they live in.

False and misleading direct mail marketing tactics

Compliance Issue: UDAAP

Regulatory Agency: Washington State Department of Financial Institutions

Total Penalty Amount: $10.5k

Summary: Washington State Department of Financial Institutions took action against a mortgage company for false and misleading direct mail solicitations that failed to disclose important information. 

According to the consent order, violations included misrepresenting the loan as having no out-of-pocket expenses, not disclosing the terms required to get a "zero appraisal,” falsely claiming to offer the best rates and fees, and not clearly disclosing the cost to the borrower to obtain the discounted interest rate. The solicitation also failed to disclose information about the monthly payment amount and additional credit disclosures.

Enforcement Action: The company was ordered to pay a $10.5k fine and is required to maintain and preserve records related to advertising, including communications with vendors involved in the creation and distribution of direct mail campaigns.

Takeaway: Mortgage companies should ensure that their marketing materials are accurate, truthful, and not misleading to avoid potential enforcement actions by regulatory agencies. It’s important to clearly disclose all information related to loan terms, costs, fees, and any required qualifications for special offers or rates. 

Regular reviews of marketing materials by legal and compliance teams prior to publication can help ensure compliance with all relevant regulations and prevent violations.

Unfair and deceptive practices around foreclosures

Compliance Issue: UDAAP, Massachusetts Act Preventing Unlawful and Unnecessary Foreclosures (“35B”)

Regulatory Agency: Massachusetts Attorneys General Office

Total Penalty Amount: $3.2M

Summary: Massachusetts AG found that a mortgage servicer engaged in unfair and deceptive practices in its mortgage servicing, debt collection, and foreclosure practices by failing to help homeowners avoid foreclosure, harassing consumers with excessive debt collection calls, and unfairly charging foreclosure-related fees before obtaining authority to foreclose. 

Other violations include failure to complete timely reviews of borrowers’ loan modification applications, failure to disclose reasons for denying a loan modification, and failure to provide borrowers with notice of their right to present a counteroffer. The company also did not provide borrowers with a written assessment required by law, which provides borrowers with the company’s calculation of the borrower’s income, debts, and obligations, and the company’s analysis weighing foreclosure against modification.

Enforcement Action: The mortgage company must provide affected homeowners with $2.7 million in direct borrower relief in the form of principal forgiveness for eligible loans. The company will also pay $500,000 to the state and make significant changes to its business practices in order to better assist struggling borrowers.

Takeaway: Compliance with all federal and state-level regulations is crucial. Mortgage companies should regularly monitor their marketing materials, calls, and practices to ensure that they do not engage in unfair and deceptive practices that harm their customers.