Wednesday, March 9, 2011

House Republicans trying to stunt the new consumer bureau before it grows up

So now we have House Republicans complaining over-loudly that the Consumer Financial Protection Bureau lacks authority to negotiate a settlement that would cause several of the biggest lenders to civilize their mortgage collection behavior and reduce some people's actual mortgage debts. That is, before this new agency grows into a real regulator in the old trust-busting tradition, they want to squeeze it down to a dry fluffy frill of a do-gooder office. Also, more urgently, they would just love to pin "blame" on the new do-gooders for a settlement proposal that in fact has backing from a big crowd of authoritative state and federal government entities.

Bloomberg reports that Rep. Scott Garrett, R-NJ, as chair of the Capital Markets and GSEs subcomittee at Financial Services, wrote a letter to Geithner signed by "U.S. House Republicans" -- not saying how many or who -- complaining that the proposed settlement agreement "not only legislates new standards and practices for the servicing industry, it also resuscitates programs and policies that have not worked or that Congress has explicitly rejected".

Heavens, we wouldn't want to tell the servicing industry it was servicing people the wrong way.

Looking in vain for this letter of Garrett's on the House Web site, I learned instead that the same Rep. Garrett is terribly concerned about victims of the Madoff scam. (A class difference, perhaps?)

The letter is in fact online -- funnily enough without signatures -- on the Web site of American Banker magazine, as an attachment to a detailed article about Republican objections to the proposed draft settlement. It sounds all anxious, in an are-you-now-or-have-you-ever-been kind of way, about "What role did persons associated with the CFPB have in drafting the proposals in the draft term sheet?

As in, back out now, friends, you can still blame those dreadful outside agitators for turning your heads. (Isn't it fun how authoritarians blame outside agitators when the help revolts?)

Anyway the letter-writers are upset by a call in the proposed settlement for continuation of the HAMP loan modification program, and even more by its proposal "to require write-downs of mortgage principal, which both the House and Senate have rejected in the context of bankruptcy proceedings."

As in, talk all you like but don't ask our friends the bankers to forgive debts.

The AB article also says Sen. Shelby of the Senate Banking Committee is claiming the regulators want $30 billion in damages, but "The damages number is a source of contention among regulators and has not been finalized." Another attachment to this same article seems to be the only online source for the text of the settlement proposal, which I've also linked above.

Beyond the good ideas that the House Republican letter-writers single out for horrification, the proposal would set standards for certainty and accuracy in foreclosure documents and would spell out honest efforts a lender would need to make to help borrowers avoid foreclosure -- not just big steps like reducing mortgage principal, but small steps like providing human staff to talk to borrowers instead of hiding behind recorded messages. Sounds pretty OK.

On the other hand, there are never only two sides to any fight. David Dayen at Firedoglake is still not crazy about the regulators' proposal, and he has a nice assortment in his post of varied critiques by sensible experts.

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