Earlier this year, the California Department of Financial Protection and Innovation (DFPI) announced a $2.3 million settlement with a mortgage lender over borrower overcharges tied to per diem interest.
This wasn't just about one technical rule; it was about the compound effect of overlooked mortgage compliance issues across nearly 5,000 loans spanning seven years between 2012 and 2019.
The settlement itself may not be unprecedented, but the circumstances behind it should command the attention of every mortgage executive.
The case demonstrates how seemingly routine processes can create systemic mortgage risk when left unchecked, and how regulators are increasingly focused on not only accuracy but also timeliness in compliance.
The Technical Rule Behind the $2.3M Lesson
California’s requirements for per diem interest appear straightforward: borrowers may not be charged interest for more than one day prior to loan funding. In addition, any refund of excess interest must be delivered within 10 days of funding. Yet the simplicity of the rule masks the complexity of mortgage post-closing compliance.
What makes this case particularly instructive is not just the overcharges themselves, but the fact that delayed refunds constituted separate violations.
This distinction fundamentally reshapes how mortgage companies must think about compliance risk. Compliance can no longer be defined only by whether errors are eventually corrected. Timeliness is now an equally important benchmark.
How Regulators Think
When state or federal regulators detect an issue, they rarely stop with the current quarter or year. Instead, they conduct retrospective audits, sometimes spanning five to seven years, to assess the full scope of the violations.
That’s why the DFPI settlement in the Caliber case covered loans spanning multiple origination years. From the regulator’s perspective, each loan file is a data point in a larger pattern analysis. What might look like “small” mistakes inside a single shop can compound into evidence of systemic compliance failures with millions of dollars of borrower impact once reviewed in aggregate.
This backward-looking lens is not unique to California. Regulators across the country, including the Consumer Financial Protection Bureau (CFPB), have signaled that consumer protection requires both historical accountability and forward-looking safeguards.
Post-Closing as a Risk Control
The natural question is: how do lenders ensure these kinds of risks don’t accumulate over time? The answer lies in rethinking how the post-closing function is managed.
Too often, post-closing is treated as a back-office necessity — a final checkpoint to ensure document completeness before files are shipped to investors. Files are checked for completeness, documents are finalized, and the focus quickly shifts back to the pipeline.
This perspective, however, fundamentally misunderstands post-closing's potential role as a strategic risk management function.
Consider this: If compliance issues arise, particularly those that span years, post-closing audits are often where the first warning signs would have appeared.
By elevating the role of post-closing, lenders can turn what has been a routine checkpoint into a true risk control center. However, this requires both mindset and operational changes. Post-closing teams need the tools, training, and mandate to identify patterns that could signal compliance vulnerabilities before they accumulate into regulatory violations.
Three Practices that Matter
Portfolio-Level Historical Reviews
Instead of reviewing a handful of files each month, lenders should periodically review entire portfolios covering multiple years. This mirrors the retrospective lens regulators apply and allows organizations to self-identify and remediate issues before they draw scrutiny.
Continuous Monitoring
Errors that repeat monthly or quarterly compound into major liabilities over time. Post-closing teams should implement ongoing monthly review cycles that flag recurring issues quickly, enabling proactive intervention before they escalate.
Dynamic Compliance Alignment
Regulations evolve continuously. State agencies like the DFPI and federal bodies like the CFPB adjust priorities frequently. Post-closing functions need mechanisms to adapt procedures in near real time — backed by automated rule monitoring, versioned SOPs, and auditable change logs — to stay aligned with the latest mortgage compliance requirements.
How Sourcepoint Enables Strategic Compliance Management
At Sourcepoint, we've moved beyond traditional outsourcing models to deliver what we call UnBPO™ — a tech-driven, outcome-focused approach that challenges the status quo and reimagines how mortgage operations can prevent regulatory risk while driving business value.
Our 25+ years of experience working with top mortgage companies has shown us that effective compliance management requires more than manual reviews and reactive fixes. It demands intelligent systems that blend automation with expert human oversight, creating proactive safeguards rather than reactive responses.
Comprehensive Portfolio Intelligence
We enable lenders to implement the kind of multi-year portfolio reviews that mirror regulatory methodologies. Our teams help organizations conduct comprehensive assessments spanning multiple origination years, identifying patterns and potential issues before they attract regulatory attention.
Intelligent Monitoring Systems
Through our UnBPO™ methodology that blends skilled resources with AI, ML, and analytics, we help lenders implement continuous monitoring capabilities that flag recurring issues in real-time.
Adaptive Compliance Frameworks
Our teams maintain current knowledge of evolving regulations and help clients implement procedural updates in near real-time. This ensures ongoing compliance alignment as DFPI, CFPB, and investor requirements shift, reducing the risk that operational procedures lag behind regulatory standards.
The UnBPO™ Difference
The traditional BPO transformation approach provides incremental benefits, but the UnBPO™ methodology is designed to deliver disproportionate returns in shorter timeframes. This approach accelerates transformation and puts technology first in reimagining strategies around people, processes, and technologies.
Our UnBPO™ approach doesn't just improve operational efficiency — it creates systematic capabilities that turn mortgage compliance from a cost center into a competitive advantage.
We help several top lenders and servicers enhance mortgage operational agility across the entire lifecycle — from origination through servicing — creating measurable business impact.
Key Takeaways for Executives
The lessons from the Caliber case extend beyond per diem interest calculations or California-specific requirements. They offer several lessons for leaders across origination and servicing:
- No error is too small. Even minor interest miscalculations can scale into millions of dollars in penalties. Risk management systems must account for cumulative impact, not just individual transaction accuracy.
- Late fixes don’t count. Refunds delivered after required deadlines are still violations. Meeting substantive requirements isn't sufficient if timing requirements are missed.
- Expect retrospective audits. Regulators will look back years, not months, when an issue surfaces. Historical practices remain live risks until statute of limitations expire.
- Prevention is stronger than defense. Identifying and correcting issues internally, before an audit, is always the safer path. Investment in proactive systems pays dividends in risk reduction.
Shifting the Industry Mindset
If the mortgage industry is to avoid repeating these mistakes, executives must rethink the positioning of post-closing within the mortgage lifecycle. This isn’t simply the last stop in the process. It’s a forward defense against risk, a safeguard for borrowers, and increasingly, a strategic differentiator.
Strong post-closing practices can do more than avoid fines. They reinforce borrower trust, demonstrate operational discipline to regulators and investors, and reduce reputational risk. In a market where margins are tight and scrutiny is high, those outcomes matter.
At Sourcepoint, we help mortgage companies realize this transformation through our comprehensive set of licenses and strategic client partnerships. Our mortgage services create differentiated business value while enabling customers to focus on what matters most.
Conclusion
The $2.3M DFPI settlement with Caliber Home Loans was rooted in a technical detail, but its implications extend throughout the mortgage industry. It’s a reminder that regulatory expectations are rising, operational missteps compound over time, and traditional approaches to mortgage compliance may be insufficient in today’s environment.
For industry leaders, the case presents both a warning and an opportunity. Executives should use this moment to strengthen internal safeguards, particularly in post-closing compliance, before regulators highlight the gaps for them.
At Sourcepoint, we partner with leading lenders to transform this challenge into opportunity through our UnBPO™ approach — delivering compliance solutions, rapid implementation, and outcome-driven results that fuel growth.
Author bio:
Rajkumar Ramakrishnan, AMP, is Vice President of Operations at Sourcepoint, a Firstsource Company. With over 20 years of experience in mortgage operations, compliance, and risk management, Raj helps leading mortgage companies navigate complex regulatory environments while building sustainable operational advantages.