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Kai Ryssdal: There’s some movement in the scandal over botched foreclosure paperwork. The robosigning revelations of last fall from big banks like Bank of America and Wells Fargo. Attorneys general from all 50 states and federal officials are in talks with the biggest mortgage lenders.
Regulators want to establish a code of conduct for mortgage lenders to ideally reduce the number of foreclosures. The enforcer would be a new cop on the beat, as our Washington bureau chief John Dimsdale explains.
Dimsdale: As the state attorneys general met to discuss the foreclosure crisis, advocates for holding banks more accountable chanted outside.
People chanting: Attorneys general: prosecute the criminals!
The protesters want state and federal bank regulators to force mortgage lenders to reduce principal and lower interest rates for homeowners who owe more than their house is worth. As part of their proposed agreement, the state AGs would require lenders to submit their loan modification formulas to a review by the newly created Consumer Financial Protection Bureau. The CFPB would review those formulas from a consumer perspective.
Dean Baker at the Center for Economic and Policy Research says it’s the only regulator with any credibility.
Dean Baker: These abuses took place when you have these other regulatory agencies basically ignoring them. So this is a bureau that I think people have some confidence in, so it certainly would be the right one to turn to.
But that bureau is still being put together, says Karen Petrou at Federal Financial Analytics.
Karen Petrou: The CFPB right now lacks clear enforcement authority, first and foremost because it doesn’t have a confirmed director with express authority under law. So if the CFPB now seeks to exert its authority, that would at least be questioned.
Under the state AGs’ proposal, bank lenders would have to give each borrower a single case manager to help guide them through foreclosure. And the banks would have to suspend the foreclosure process while documents are under review.
In Washington, I’m John Dimsdale for Marketplace.
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