Elizabeth Warren, the White House/Treasury aide charged with setting up the Consumer Financial Protection Bureau, is spending the day in Ohio to attend a consumer roundtable in Columbus. She'll talk with people about their financial concerns as part of outreach efforts surrounding the stand-up of the new agency.
It is, of course, no coincidence that Warren is in Ohio, which has been ground zero for the latest phase of the foreclosure crisis* as new document fraud by mortgage servicers has been exposed on a massive scale. While the administration's rhetoric about keeping the system moving forward has been criticized for overlooking the human costs of foreclosures, Warren is taking a (slightly) different tack, applauding servicers who have voluntarily suspended foreclosure and arguing that their decision demonstrates that this is a serious problem in need of a solution. That's a step in the right direction -- right now, the administration has hit the pause button on this issue, waiting to learn its fuller implications before taking a more straightforward position.
The challenge for Warren and the administration is that there's not much they can do at the moment. The CFPB won't have the ability to regulate mortgage servicers until it stands up on July 21, 2011; even if it were around today, it's hard to think what the solution to the immediate problem would be from their perspective; many of the problems in the document chain will need to be sorted out in state court. The CFPB will have the ability to lead servicer reform when it is fully operational, although Treasury officials anticipate that Congress will take the first crack at the job as part of efforts to reform Fannie Mae and Freddie Mac, the two government-sponsored entities who back a majority of American mortgages.
The administration vetoed a bill last week that would have made it easier for servicers to get around foreclosure document fraud, and is ramping up its own investigations into the extent of the problem. But more action will be needed on a federal level to help resolve this mess. It won't come from Warren's office but from the Financial Stability Oversight Council, and Fannie and Freddie, as the government assesses the systemic implications of this mess and looks to correct it. Warren, however, should be in the room for that discussion, because the necessary correction includes help for troubled homeowners.
-- Tim Fernholz
