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On October 30, the California DFPI entered a consent order with a residential mortgage lender and servicer following a regulatory examination and a directed self-audit. The DFPI alleged violations of the California Residential Mortgage Lending Act and California Civil Code provisions governing when per diem interest may begin to accrue.
The DFPI alleged that the lender collected per diem interest for more than one day prior to escrow disbursement in files reviewed during the exam, and that a self-audit identified 10 of 74 additional loans with per diem overcharges. The DFPI also alleges failures to maintain required business records for thirty six months and broader books-and-records deficiencies beyond the thirty six month maintenance requirement.
Under the consent order, the lender must discontinue the cited practices and pay a $100,000 civil penalty in monthly installments through October 1, 2026. The company also affirmed refunds totaling $1,554.93, including interest at ten percent per annum. The order includes an acceleration clause for noncompliance and reserves DFPI's ability to pursue future remedies.
Putting It Into Practice: The DFPI continues to be very active in enforcement (previously discussed here, here, and here). California-licensed mortgage lenders and servicers should confirm that interest does not begin before escrow disbursement, align loan documents with the correct interest start dates, and validate refund protocols for any overcharges.
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