The head of the Consumer Financial Protection Bureau said Friday the only way to create meaningful change in the mortgage market is for citizens to unite with federal agencies, state officials and local partners.
Speaking in Indianapolis to the nation's top business editors and journalists, Richard Cordray said the attorneys' general $25 billion settlement with mortgage servicers is a broad effort to police the financial marketplace and is an example of the necessary involvement of all levels of government. He wouldn't speak on details of the settlement.
"But it expands beyond government," he added. "You need consumers themselves to recognize and understand that protecting themselves is the most effective way that we can police this marketplace and that means voting, speaking up and banding together and having their voices heard. We've seen multiple occasions where that has been effective in the marketplace, and it makes the marketplace work. It has to be a two-sided conversation on both sides of each transaction"
However, Cordray doesn't see a finish line anywhere down the road.
"Maybe the most staggering thing for people who grew up with this crisis has been its durability," Cordray said. "It's 2012 and there's no end in sight. This has been a significantly broken market and it is by far the single largest market for household credit. It is a multitrillion-dollar market that was large enough in its dysfunctionality to bring down the entire economy."
Cordray stressed the CFPB's "broad comprehensive authority" over the mortgage market. The agency regulates banks' and nonbanks that, he pointed out, were largely unpoliced during the run-up to the crisis.
"Whenever you have a market that is partly regulated and partly unregulated, that's a recipe for disaster, and it was here," he said.
The CFPB is partnering actively with state officials of a variety of different types, including state attorneys generals who were colleagues of Cordray when he was Ohio's AG.
"It's an uneven landscape across the country which creates challenges, but where there is authority and states are exercising it, it behooves us to work with them to try to attack problems," he said.
Securities and Exchange Commission Chairwoman Mary Schapiro said Thursday that her agency established a new whistleblower program that is now producing high-quality leads and shortening the length of some of the CFPB investigations.
Lynn Szymoniak, a well-known Florida attorney and whistleblower who appeared on '60 Minutes' to make allegations of robo-signing against mortgage servicers will receive $18 million to settle her lawsuit over the foreclosure of her condo.
She filed her case under the False Claims Act, which allows the government to bring civil actions against entities that knowingly use or cause the use of false documents to obtain money from or conceal an obligation to pay money to the government.
Banks are paying tens of millions of dollars to resolve whistleblower lawsuits alleging lenders defrauded the government in seeking federal mortgage insurance for some risky loans. In addition to Florida, the multistate AG settlement resolves cases in New York, Georgia and Massachusetts.