Multiple Fronts in Mortgage Industry War

Multiple Fronts in Mortgage Industry War (cont.)

The proposal has elicited howls of protest from the banking industry, who accuse the state regulators of using the investigation as a backdoor method of imposing new regulations. The AG’s in Virginia and Oklahoma have broken with the coalition, saying the proposal goes too far. They also say that leaders in other states oppose the measure as well.

“My concerns, and I know other AG’s have similar concerns, is that there appears to be an attempt by some to essentially rewrite certain banking and servicing laws,” Virginia Attorney General Kenneth Cuccinelli told American Banker.

Meanwhile, there are signals that the Obama administration supports many parts of the state regulators’ proposal. It is pushing the five largest servicing companies to accept the states’ deal, and to reduce mortgage payments for up to 3 million people, according to unnamed sources cited by the Huffington Post.

The deal could cost the companies $30 billion, according to Inside Mortgage Finance, an industry newsletter.

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Even though the Obama administration’s push in favor of the states’ demands has not been officially announced, banking officials and Congressional Republicans already are pushing back. The Consumer Financial Protection Bureau was involved in negotiations over the states’ proposal. That raised the ire of Republicans, who pointed out that the bureau’s power to enforce regulations doesn’t begin until July.

“The involvement of bureau employees in these discussions raises serious questions,” Rep. Shelley Moore Capito (R-WV), chairwoman of the Subcommittee on Financial Institutions and Consumer Credit, said in a hearing.

Elizabeth Warren, President Obama’s adviser charged with starting the new agency, fired back, saying that her workers did not overstep their bounds.

“We’ve been asked for advice. . . and wherever we can be helpful we are not only glad to be helpful we are proud to be helpful,” Warren said.