The Consumer Financial Protection Bureau is preparing to impose rules on U.S. mortgage servicing firms, said Raj Date, the bureau’s associate director.
When the bureau begins formal operation July 21, “mortgage servicing will be one of CFPB’s priorities,” Date said in testimony prepared for delivery to members of the House Financial Services Committee today.
The $10.4 trillion industry has structural features “that make it especially prone to the risk of consumer harm,” one of which is lack of consumer choice, Date said. A homeowner doesn’t have the option of shopping for a better or more competent provider, he said.
“I get to choose my pharmacist. I don’t typically get to choose my mortgage servicer,” Date said.
Members of the financial services and oversight subcommittees of the House panel are examining lapses and gaps in mortgage servicing regulation.
State attorneys general and the Justice Department are advanced talks with JPMorgan Chase & Co., Bank of America Corp. and three other servicers on a $20 billion settlement to resolve state and federal claims over botched foreclosures, faulty paperwork and inadequate staffing by the industry, according to two people briefed on the matter.
In remarks prepared for delivery at today’s hearing, oversight subcommittee chairman Randy Neugebauer, a Texas Republican, called the proposed settlement an attempt to legislate through enforcement.
The Office of the Comptroller of the Currency, Office of Thrift Supervision, Federal Reserve and Federal Deposit Insurance Corp. reached an accord with the 14 largest servicers in April, requiring them to improve foreclosure, loan-modification and refinancing procedures. The settlement covers firms that handle nearly 70 percent of all mortgages.
The Dodd-Frank Act that became law a year ago gave the consumer bureau authority to impose standards on non-bank servicers that aren’t subject to traditional federal banking regulation. In May, the Government Accountability Office said federal oversight of the industry has been “limited and fragmented.”
Date said the bureau is working with other agencies, including the Federal Housing Finance Agency, which oversees mortgage companies Fannie Mae and Freddie Mac, to establish industry standards.