Raj Date Commits CFPB to Mortgage Servicer Reform

Have you heard of Raj Date yet? If not, you will be hearing more from him soon. He’s currently servings alongside Elizabeth Warren staffing up the new Consumer Financial Protection Bureau and has been mentioned as a possible nominee to run the CFPB out of the gate. The office “stand up” date is two weeks from yesterday and 44 Republicans in the Senate have signaled they will block ANY nominee. The White House does responded by not nominating anyone (not sure that’s a particularly good idea.) This has certainly created a bit of confusion as to how the CFPB will meet its congressional mandate to serve as the cop on the beat in the financial marketplace.

But that’s not to say there is not already work going on. Yesterday, Raj testified before the House Committee on Financial Services on mortgage servicing standards.

For a number of reasons, this is a topic I’ve been writing about and highlighting along with my colleagues. The current mortgage servicing process is rigged to favor foreclosures that could be and should be prevented. We need to level the playing field to give homeowners a fair chance to avoid the debilitating experience of losing their home. As Raj’s points out, people can choose their lender but they don’t get to choose their servicers. This is all well and good when the servicer is simply processing payments. But the housing crisis has created a bit more complexity and many mortgage servicing operations are simply not designed to engage with homeowners who need to figure out ways to stay current on their loans. And the testimony goes on to chronicle the numerous problems among the servicers that have been well documented.

There are a number of common sense proposals to fix the process, some of which have been put in legislative form by Sen. Jeff Merkley of Oregon. You can read about these here.

It turns out that Raj agrees. He writes:

The Bureau is not yet open for business. But two weeks from now, on July 21st, the Bureau will receive transferred authority from existing regulators to administer federal consumer financial protection laws. And on that day, mortgage servicing will be one of the CFPB’s priorities.

and

The two key consequences of this flawed regulatory structure have been the lack of comprehensive federal standards for mortgage servicers, and the lack of any direct federal oversight of non-depository servicers. In creating the CFPB, Congress vested the agency with sufficient jurisdiction and powers to protect consumers in all mortgage servicing activity – regardless of the servicer’s charter or locale. In using these authorities, the Bureau will work together with the prudential regulators and other agencies to ensure the efficient and effective exercise of its responsibilities and to improve the functioning of the mortgage servicing market.

It seems like he might be up for the job to run the whole show over there.