By Ted Carter
A strong and functioning consumer financial protection bureau as envisioned by the Dodd-Frank banking reform law could have prevented the current mortgage foreclosure fiasco, says Elizabeth Warren, a Harvard University law school professor appointed by President Obama to oversee development of the new Consumer Financial Protection Bureau.
Writing in a Miami Herald op-ed, Warren blamed the spread of the nation’s foreclosure mess on the absence of a federal entity that could push for enforcement of laws already on the books and draw in the involvement of state banking authorities. “By enforcing existing laws and involving state authorities early on, the agency could have made sure that the law was respected.”
The result? A clear example that banks must follow the same rules as families and individuals.
Much of the foreclosure trouble has been blamed on flawed servicing practices, including the “ro-bo” signing of foreclosure documents and the failure of mortgage lenders to record and properly transfer mortgage papers.
Warren has strong support from progressive Democrats to become the permanent head of the Consumer Financial Protection Bureau. Conservatives and many business groups say they would fight her nomination and confirmation. They say they fear she would bring too much regulation into the financial sector.
But her op-ed column makes clear that she thinks the new regulatory entity will have full authority to punish national lenders who fail to follow proper foreclosure procedures.
“Once it is fully operational, the new consumer agency will have supervisory authority over all large mortgage servicers,” Warren writes. “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.
“No one will be allowed to break the rules without triggering a strong and prompt federal response.
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