CFPB says lack of mortgage regulation failed consumers

by Adam Smith16 Sep 2013

CFPB director Richard Cordray has claimed that the pre-crisis lack of oversight in areas of the mortgage market let consumers down, and has defended the role of the CFPB.

In an interview with The Washington Post, Cordray argued in favor of Dodd-Frank oversights, saying that pre-financial crisis oversight was not adequate.

"It recognizes that only supervising chartered institutions is not a very workable model because in the actual marketplace for several of these products — mortgage origination, mortgage servicing, small-dollar lending — you have chartered institutions and non-chartered institutions competing against each other.

"That model really failed us in the mortgage market and in the lead-up to the crisis. And it was a lot of the unsupervised areas where some of the most irresponsible practices occurred. We have line of sight now across markets, which is critical for regulatory success," he said.

Cordray said many financial institutions were accustomed to regulation, but not from the standpoint of consumer protection. Others, he said, were unaccustomed to any oversight at all.

"But in the nonbank sphere, they’re often not used to being regulated at all, or only on the state level. In that area, there has been a real shift toward more of a compliance mentality. And our being on the scene and doing this work has caused that shift. And it’s an important one if we’re going to get to where we have a leveled playing field in these markets," Cordray said.

Cordray conceded that the CFPB's oversight has caused consternation in the financial services industry, but said the regulator has been reasonable in the way it's gone about its job.

"I understand there has been a lot of anxiety. People aren’t sure what to make of it. They’re worried about a new agency and how it will exercise its authority. But we’ve been reasonable, open-minded, accessible and genuinely focused on trying to get this right," Cordray said.

 

COMMENTS

  • by John C Durham | 9/16/2013 9:20:47 AM

    He, Elliot Spitzer & Kamala Harris are the winners in getting the most from banks in court. Actually, he is the overall winner by several hundreds of millions. Appreciate you concentrating on the people who are actually on OUR side of this long, long fight which will continue until we have all of the main jackals in the TBTF banks in jail.

  • by Dan Harp | 9/16/2013 9:20:50 AM

    It was the lack of a functional educational system in this country that failed consumers, not the previous mortgage regulation!

  • by Elaine R | 9/16/2013 9:35:44 AM

    That's absolute bull-crap!! It was Franklin Raines, when he was head of FNMA that saw a golden opportunity (courtesy of George Bush) to make buckets of money by giving his seal of approval to the sub-prime mortgages that took off like a shot. If FNMA had not drafted the regs, or purchased them, we wouldn't have this mess. Let's get real, and pinpoint the actual source of this mess.
    There is NO need to "protect" the consumer with anymore ridiculous regulation.

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