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Warren: CFPB Could Have Stopped Foreclosure Fraud

Elizabeth Warren (photo: New America Foundation via Flickr)

Elizabeth Warren has been busy setting up the new Consumer Financial Protection Bureau. Though there are indications that she was the prime mover in stopping a bill that would have legalized out-of-state and electronic notarizations and made it harder for foreclosure defense attorneys to challenge paperwork, and though Warren has made it clear that she favors the 50 state Attorneys General investigation as the best way to get to the bottom of the crisis, she has been somewhat reticent about foreclosure fraud. No longer.

In an op-ed that was in last week’s print edition of the Miami Herald and only got posted on their website in the past couple days, Warren writes about the crisis in a newspaper at the very heart of it. Essentially, her point is that the fraud proves the need for a consumer agency.

No one has missed the headlines: Haphazard and possibly illegal practices at mortgage-servicing companies have called into question home foreclosures across the nation.

The latest disclosures are deeply troubling, but they should not come as a big surprise. For years, both individual homeowners and consumer advocates sounded alarms that foreclosure processes were riddled with problems […]

The practices now under investigation took root and grew because there was no single federal regulator with both the responsibility and the tools to look out for consumers.

Had it existed, the new consumer agency could have stopped these problems before they multiplied. Many of the failures already admitted were not sophisticated scams that had been carefully concealed. By enforcing existing laws and involving state authorities early on, the agency could have made sure that the law was respected. No one would need to wonder whether the world of borrowing and lending works only one way: Families have to follow the legal rules, but the rules are optional for big banks.

Once it is fully operational, the new consumer agency will have supervisory authority over all large mortgage servicers. It will be able to examine them on a regular basis to make sure they follow the rules. If those servicers decide it is cheaper or faster to circumvent federal law, the consumer agency will have the tools to hold them accountable.

This is the important point – the loan servicer standards that everyone’s looking for will have their authority located in CFPB.

Warren reveals in this op-ed that she personally sat in on a “rocket docket” foreclosure court in Fort Lauderdale recently, bearing witness to the pain of families. She undoubtedly saw a fast-moving, confusing process designed to kick people out of their homes. The systems in the servicing industry are broken, and not just in Florida, but everywhere. If borrowers who never missed or were even late on a payment can be targeted for foreclosure, then the automated processes are simply flawed beyond repair. Banks are criminally stealing homes from homeowners with perfect records. They are maximizing their revenue-making potential on the backs of their own customers, who they can make more money off of in foreclosure than in modification.

This is a job for Elizabeth Warren. The day when the CFPB swings into operation cannot come fast enough.

CommunityThe Bullpen

Warren: CFPB Could Have Stopped Foreclosure Fraud

Elizabeth Warren has been busy setting up the new Consumer Financial Protection Bureau. Though there are indications that she was the prime mover in stopping a bill that would have legalized out-of-state and electronic notarizations and made it harder for foreclosure defense attorneys to challenge paperwork, and though Warren has made it clear that she favors the 50 state Attorneys General investigation as the best way to get to the bottom of the crisis, she has been somewhat reticent about foreclosure fraud. No longer.

In an op-ed that was in last week’s print edition of the Miami Herald and only got posted on their website in the past couple days, Warren writes about the crisis in a newspaper at the very heart of it. Essentially, her point is that the fraud proves the need for a consumer agency.

No one has missed the headlines: Haphazard and possibly illegal practices at mortgage-servicing companies have called into question home foreclosures across the nation.

The latest disclosures are deeply troubling, but they should not come as a big surprise. For years, both individual homeowners and consumer advocates sounded alarms that foreclosure processes were riddled with problems […]

The practices now under investigation took root and grew because there was no single federal regulator with both the responsibility and the tools to look out for consumers.

Had it existed, the new consumer agency could have stopped these problems before they multiplied. Many of the failures already admitted were not sophisticated scams that had been carefully concealed. By enforcing existing laws and involving state authorities early on, the agency could have made sure that the law was respected. No one would need to wonder whether the world of borrowing and lending works only one way: Families have to follow the legal rules, but the rules are optional for big banks.

Once it is fully operational, the new consumer agency will have supervisory authority over all large mortgage servicers. It will be able to examine them on a regular basis to make sure they follow the rules. If those servicers decide it is cheaper or faster to circumvent federal law, the consumer agency will have the tools to hold them accountable.

This is the important point – the loan servicer standards that everyone’s looking for will have their authority located in CFPB.

Warren reveals in this op-ed that she personally sat in on a “rocket docket” foreclosure court in Fort Lauderdale recently, bearing witness to the pain of families. She undoubtedly saw a fast-moving, confusing process designed to kick people out of their homes. The systems in the servicing industry are broken, and not just in Florida, but everywhere. If borrowers who never missed or were even late on a payment can be targeted for foreclosure, then the automated processes are simply flawed beyond repair. Banks are criminally stealing homes from homeowners with perfect records. They are maximizing their revenue-making potential on the backs of their own customers, who they can make more money off of in foreclosure than in modification.

This is a job for Elizabeth Warren. The day when the CFPB swings into operation cannot come fast enough.

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David Dayen

David Dayen