WASHINGTON — The Consumer Financial Protection Bureau penalized two nonbank mortgage lenders on Wednesday for incorrectly reporting data to regulators in a move certain to draw significant attention from the rest of the industry.

The agency assessed $459,000 in penalties against Mortgage Master and Washington Federal for failure to properly comply with the Home Mortgage Disclosure Act of 1975. Lenders are required by law to collect and report mortgage information, including applications, originations and denials by the borrower's race, to financial regulators that publicize the aggregate data annually.

Though lenders have reported the information for decades, the CFPB — which took over authority for HMDA data after the passage of the Dodd-Frank Act — issued a strict notice in addition to its enforcement actions that made it clear it will be scrutinizing lenders for HMDA compliance.

"When financial institutions report inaccurate information, it obstructs the purpose of the Home Mortgage Disclosure Act and makes it more difficult for the CFPB to discover and stop discriminatory lending," said CFPB Director Richard Cordray in a press release. "Today we are sending a strong signal that no mortgage lending institution — whether bank or nonbank — should be able to mislead the public with erroneous data."

Mortgage Master, in Walpole, Mass., was fined $425,000 for having "significant data errors" in more than 21,000 mortgage applications it reported for 2011, the CFPB said. Washington Federal, in Seattle, was fined $34,000 for also having significant errors in more than 5,700 mortgage applications reported that same year.

The CFPB said having such inaccurate information "impedes" its ability to detect potential fair lending violations, which is often what regulators use HMDA data for when examining financial institutions, particularly in areas like the Community Reinvestment Act and the Fair Housing Act.

"To date, the bureau has conducted HMDA reviews at dozens of mortgage lenders, both bank and nonbank, and has found that many lenders have adequate HMDA compliance systems, resulting in HMDA data with no errors or very few errors," the CFPB said in the press release. "In its HMDA reviews conducted at Mortgage Master and Washington Federal, however, the CFPB found that their compliance systems were inadequate and that they had severely compromised mortgage lending data."

Even though the CFPB acknowledged many lenders are in compliance with the law, it released a bulletin to all institutions and resubmitted guidelines for how its examiners with review HMDA data during an exam. In particular, the CFPB said it will press lenders not only to report the data, but also to prove that they have an "effective" compliance management system that audits, tests and evaluates the data internally. This also includes how lenders test their own error rate, and how quickly they correct and self-report errors.

"CFPB examination teams will use different guidelines when they conduct HMDA reviews at banks and nonbanks that have 100,000 or more mortgage loans to report," the agency said. "This is because a low error rate at a large institution can reflect a larger number of HMDA data errors than a comparable error at a smaller institution."

The CFPB's newest HMDA exam guidelines will apply to HMDA reviews starting Jan. 18.

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