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State Regulators Announce Settlement Agreement with CitiFinancial

This release was issued by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators.

March 24, 2010

WASHINGTON—The Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR) today announced a 35 state settlement, in which CitiFinancial agreed to remit a $1.25 million penalty.

The agreement between state mortgage regulators and CitiFinancial was executed following 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 residential mortgage loans that were omitted from CitiFinancial’s HMDA Loan Application Register were originated between 2004 and 2007. The failure to report the loans was apparently caused by an internal systems error at CitiFinancial that went undetected until the Massachusetts Division of Banks examination.

Steven L. Antonakes, Massachusetts Commissioner of Banks, said “HMDA remains the primary tool we utilize to ensure compliance with fair lending laws and regulations. By failing to accurately report all required transactions, CitiFinancial hampered our ability to complete that assessment. Therefore,” Commissioner Antonakes concluded, “today’s agreement will ensure that the systems, training, and appropriate oversight and controls are in place to avoid a similar occurrence in the future.”

Major terms of the agreement include:
  • CitiFinancial already resubmitting corrected and complete HMDA reports to the Federal Reserve System for the years 2004-2007;
  • 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 highlights the value of state enforcement of federal consumer protection laws,” said Mark Pearce, President of AARMR and Chief Deputy Commissioner of the North Carolina Office of Commissioner of Banks. Pearce continued, “State regulators supplement existing federal efforts and help ensure consumer protections are rigorously enforced.” Pearce went on to say, “This settlement demonstrates the ability of state regulators to work together effectively to address our systemic compliance concerns with a large national lender.”

State regulators have significantly enhanced multistate cooperation in recent years through projects such as the development and launch of the CSBS/AARMR Nationwide Mortgage Licensing System (NMLS) and the creation of the Multi-State Mortgage Committee to provide seamless supervision of mortgage companies operating in more than one state.

The 35 state mortgage regulators included in this settlement agreement are the Alabama State Banking Department; the Arizona Department of Financial Institutions; the Connecticut Department of Banking; the Delaware Office of the State Bank Commissioner; the Georgia Department of Banking and Finance; the Hawaii Division of Financial Institutions; the Idaho Department of Finance; the Illinois Department of Financial Professional Regulation; the Indiana Department of Financial Institutions; the Iowa Division of Banking; the Kentucky Department of Financial Institutions; the Louisiana Office of Financial Institutions; the Maine Bureau of Consumer Credit Protection; the Maryland Office of the Commissioner of Financial Regulation; the Massachusetts Division of Banks; the Michigan Office of Financial and Insurance Regulation; the Mississippi Department of Banking and Consumer Finance; the Montana Division of Banking and Finance; the Nebraska Department of Banking and Finance; the New Hampshire Banking Department; the New Jersey Department of Banking and Insurance; the New Mexico Financial Institutions Division; the New York State Banking Department; the North Carolina Office of the Commissioner of Banks; the Ohio Division of Financial Institutions; the Oregon Department of Consumer and Business Services; the Pennsylvania Department of Banking; the Rhode Island Department of Business Regulation; the Tennessee Department of Financial Institutions; the Texas Office of Consumer Credit Commissioner; the Utah Department of Financial Institutions; the Vermont Department of Banking, Insurance, Securities and Health Care Administration; the Virginia Bureau of Financial Institutions; the Washington Department of Financial Institutions; and the West Virginia Division of Banking.

HMDA was enacted in 1974 and is implemented by the Federal Reserve Board’s Regulation C, and requires lending institutions to report public loan data that can be used to assist:
  • In determining whether financial institutions are serving the housing needs of their communities;
  • Public officials in distributing public-sector investments so as to attract private investment to areas where it is needed; and
  • Identifying possible discriminatory lending patterns.
HMDA requires each lender to 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 whether the loan was approved or denied.