Five Democrats on the Senate Banking Committee are accusing Consumer Financial Protection Bureau Director Kathleen Kraninger of “coddling” large banks and mortgage servicers while failing to help borrowers.
The senators, including Banking Committee ranking Democrat Sherrod Brown of Ohio, pointed out that the CFPB and other banking regulators told the financial industry that they would not take enforcement actions for violating rules that require certain notices be sent to borrowers. The financial industry only had to make a good-faith effort to comply with the rules.
For instance, the senators said that Congress included the right of homeowners to request forbearance in coronavirus economic stimulus legislation, but that many homeowners are not receiving a notice informing them of that right.
The five Democrats sent a letter to Kraninger quite critical of the CFPB: “Your agency has the duty and the authority to take actions that ensure families can stay in their homes and prevent a series of irreversible foreclosures. But you are failing to meet your responsibilities. Instead of taking proactive steps to make sure that borrowers are aware of their options for mortgage assistance when they need it, the Bureau has been coddling the largest banks and mortgage servicers while doing virtually nothing to help borrowers.”
When the Federal Housing Finance Agency’s Inspector General earlier this summer cited the FHFA for failing to notify borrowers of their rights, the FHFA said that it had no enforcement responsibility over mortgage servicers. That responsibility, the FHFA said, rested with the CFPB.
The senators said that they had requested information from 11 major mortgage servicers about how they were ensuring that homeowners facing hardships could take advantage of forbearance options.
“These data, and the stark disparities they reveal, indicate that efforts to date by servicers, and by the government agencies responsible for protecting consumers – most notably, the CFPB – have failed to ensure that homeowners are aware of relief options,” the senators said.
The senators told Kraninger that the CFPB must immediately guarantee that it will aggressively enforce regulatory requirements for servicers to notify borrowers of their options to avoid foreclosure. They said that to ensure that enforcement is clear and consistent, the agency should provide servicers with additional guidance, including a model notice to borrowers.
The senators asked Kraninger to answer questions by Sept. 16 about how the agency plans to address the issues they raised.
In addition to Brown, the letter was signed by Democratic Sens. Elizabeth Warren of Massachusetts, Chris Van Hollen of Maryland, Robert Menendez of New Jersey, and Jack Reed of Rhode Island.