Will Foreclosure Abuses Ever End?
The creation of the Consumer Financial Protection Bureau is arguably the best reform to emerge from the Dodd-Frank law. An effective bureau will rectify and prevent lending abuses and ensure that consumer protection is a central priority in a sound banking system.
Yet, for all that promise, the bureau’s recent proposal to regulate the foreclosure process is a disappointment. At issue is mortgage servicing, an industry that is dominated by big banks and involves processing mortgage payments for investors who actually own the loans. When homeowners do not pay on time, it is up to servicers to manage defaults, loan modifications and foreclosures.
The problem is that as delinquencies surged in the housing bust, mortgage servicers proved themselves incompetent — or worse, deceptive and abusive — in doing the job. The result has been potentially millions of wrongful foreclosures, in which troubled borrowers have not been given a fair shot at modifying their loans and keeping their homes.