The first Director of the Consumer Financial Protection Bureau (CFPB) said the Bureau should be doing more to help consumers.
“The consumer’s bureau ... has been missing in action,” said Richard Cordray during a webinar with the Brooking’s Institute.
Cordray said the burden during this crisis has been mostly falling onto the shoulders of the consumers—many of which are running out of savings and unable to pay mortgages.
He said this crisis needed actions, enforcement, and oversight from the CFPB, which he said initially thought of this crisis as strictly business-focused.
Cordray points out the issues facing mortgage servicers, who are offering deferred payments to consumers during this crisis. He added that if these servicers are being held accountable, consumers will not be given relief.
“I think it’s time for the consumer’s bureau to step up,” he said.
Cordray added one of the issues facing servicers is there are many in the mix, and the nonbank servicers are not as capitalized and not as well prepared to handle downfalls. He said one of the items that he and the Financial Stability Oversight Council were working on before his departure was properly capitalizing servicers.
Also, he said mortgage servicing, for the most part, is an easy job when things are going well. However, during downturns, volumes increase, and servicers become overwhelmed.
Cordray said nobody could have been prepared for this, but mortgage servicers could have done more than what they did.
He added that after the Great Recession 12 years ago, it would be very difficult to go back to a community-based lending model. Cordray said advancements had been made in the economy and it has made life for consumers better, but it does come with risks.
Cordray said the Great Recession was mostly driven by foreclosures, for both consumers and business, and that doesn’t bode well for the economy. He said courts become clogged, the time frame for foreclosures stretches out, and the end results is an abundance of abandoned homes.
“We saw how dysfunctional it was during the last crisis,” he said, adding foreclosures need to be used as a last resort.