Thank goodness for the Consumer Protection Agency, and the work that Elizabeth Warren is making the new group do – which I might add, is another one of President Obama’s achievements, one that was created as a byproduct of the financial regulation that he and Congressional Democrats fought long and hard to get passed last year. Among the things that the new CPA is tasked with is sniffing out and investigating the rapidly growing number of home foreclosure scams, both from private companies that are preying on homeowners who are in trouble and want to stay in their homes as well as the actual reputable banks that hold these mortgages and are trying to kick people out of their homes without following due process.
In terms of the former however, Warren has all but said that the fact these scams even exist is proof that the CPA needs to exist, since prior to the foreclosure crisis there was no government agency, at the State or Federal level, tasked with making sure that these groups don’t take advantage of homeowners the way they do. Prior to the financial regulation law, a mishmash of government agencies were responsible for looking into the matter, and effectiveness could vary greatly depending on the one you approached with your concern.
Warren pointed out the need for the CPA and how critical this work really is in an op-ed in the Miami Herald just before the New Year:
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.
While federal and state investigators are still examining exactly what has gone wrong and why, two things are clear.
First, several financial services companies have already admitted that they used â€œrobo-signers,â€ false declarations, and other workarounds to cut corners, creating a legal nightmare that will waste time and money that could have been better spent to help this economy recover. Mortgage lenders will spend millions of dollars retracing their steps, often with the same result that families who cannot pay will lose their homes.
Second, this mess might well have been avoided if the Consumer Financial Protection Bureau had been in place just a few years ago.
The new consumer agency is one of the signature accomplishments of the Dodd-Frank Wall Street Reform and Consumer Protection Act signed into law by President Obama this summer.
While the latter is definitely a “what if” kind of statement, there’s a lot of merit to the point. After all, if there were a government agency responsible for, you know, protecting consumers of products and services – including and especially financial services, the whole foreclosure mess could have been avoided.
I think it’s a bit of a stretch to claim that the CPA could have stopped banks from coming up with new and inventive ways to charm the pants off of home buyers with the smooth talk that homes are somehow great investments and simultaneously endless ATMs from which homeowners can draw cash – all available to them for a low low price of a sub-prime home loan. I do, however, think that the CPA could have been there earlier in the game when progressives were pushing against Congressional Republicans to allow judges to modify loan terms to let people stay in their homes.
Instead – and this is commonly forgotten – Republicans sided with their friends in the financial services industry and claimed that allowing judges to re-write mortgages would circumvent the negotiation process between homeowner and their lender, and in turn put undue pressure on lenders to lose money on home investments. Their usual rallying cry, that it would make home loans “more expensive and harder for average Americans to get,” which is tantamount to the whole “if you force us to be responsible we’ll make you suffer for it” line businesses usually lay down whenever someone tells them to clean up their act, was effective enough that a few flimsy federal programs to encourage negotiation and reward banks that helped homeowners stay in their homes were put in place and we all tried to move on.
An organization like the CPA could have been that group making the hard case for loan renegotiation, and if congressional Republicans didn’t want judges to do it, they could have gone for mediation or re-negotiation with the help of the CPA. Still, the whole thing is a case of “what if,” but it’s a “what if” I wish weren’t necessary to ask – as do the millions of homeowners who may be out of their homes sooner rather than later because there was no one to help them.
[ Elizabeth Warren: Foreclosure Scams Show Need for New Consumer Agency ]