CFPB warns Nationstar that RESPA penalty may be coming

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Nationstar Mortgage may face a Consumer Financial Protection Bureau enforcement action over alleged violations of the Real Estate Settlement Act and other regulations, the Mr. Cooper parent company said.

The potential enforcement action against Dallas-based Nationstar is based on "alleged violations of the Real Estate Settlement Procedures Act, the Consumer Financial Protection Act and the Homeowners Protection Act," according to the company's latest 10-Q filing with the Securities and Exchange Commission. Last week, the lender and servicer reported net income of $160 million for the first quarter of 2018

The alleged violations stem from a 2014 examination. RESPA regulates consumer costs and fees in real estate transactions. The Homeowners Protection Act is a 1998 law pertaining to private mortgage insurance cancellation. The Consumer Financial Protection Act is the law that created the CFPB and dictates oversight of fair lending laws, among other provisions.

The bureau notified Nationstar it was considering the enforcement action through its "Notice and Opportunity to Respond and Advise" process, through which investigated parties can present their position to the bureau before the CFPB decides whether to proceed with an enforcement action.

"There can be no assurance that the CFPB will not seek to exercise its enforcement authority through settlement, administrative proceedings or litigation and seek injunctive relief, damages restitution or civil money penalties, which could have a material adverse effect," according to the SEC filing.

However, the company has not recorded an accrual related to the possible enforcement action and "does not believe a loss is probable."

The CFPB last year fined Nationstar almost $2 million for Home Mortgage Disclosure Act violations. Although there was no evidence consumers were directly affected by its failure to accurately report the home mortgage data used to identify discrimination, and other type of CFPB fines can be much higher, this was a large civil penalty for a HMDA violation.

The bureau has dropped several pending investigations recently, including one involving Altisource, a mortgage servicing technology firm with ties to Nationstar competitor Ocwen.