Ohio AG Richard Cordray Up Close
HousingWire sat down with Ohio Attorney General Richard Cordray to hear about the lawsuits his office has filed against mortgage servicers and the world’s three largest credit rating agencies. Cordray’s filed nine lawsuits against financial and investment firms connected to the economic downturn. So far, those suits have resulted in $2bn in recovered damages. Cordray’s office has sued three servicers. ... HousingWire: Why is the oversight of the mortgage servicing industry such a priority in your office? Richard Cordray: Ohio has been hard-hit and was one of the first states hit hard by the foreclosure crisis and in my view, that is the single phenomenon that is holding us back in terms of economic recovery. If we could minimize the number of foreclosures, not only would that lead to less disruption of people’s lives and less dislocation in our communities, but I also think it would remove a significant drag on our economic activity in the state and I think that’s being felt in other states around the country as well. HW: Why the servicers rather than the companies that originated the loans? RC: I do believe the originators, especially the nationally financed ones, made a lot of bad loans, some of which may have been fraudulent, a lot of which were ill-advised. There have been efforts made to seek recovery from them, and these are ongoing efforts. But in some respects, that’s now sort of old news because they aren’t originating those same loans and those same terms anymore. The market has dried up for them because people now understand how lousy the underwriting was. HW: So what do you see as the problem now? RC: The current problem is that you have all these national portfolios of mortgages that have been sold on the secondary market. The industry model now is to outsource the servicing, which is being done by these six to 12 major servicers that have nationwide portfolios. They’re the ones that are absolutely failing abysmally to do any significant loan workout effort to help keep people in their homes, which is the normal model back in the old days and still is with many of our community banks that originate loans and keep them in their own portfolios. They would work with the borrower to try to keep them on their mortgage and in their home. The national loan servicers have not staffed up properly or adequately to do that. It seems that their perspective is all that does is cut into their profit margin. What they like to do is take your check and allocate it to the right spot, and that’s easy for them. But most of them are less than a decade old and they’ve never had to do any significant workout work, and they don’t seem to take it seriously. TO READ THE FULL STORY, SUBSCRIBE NOW.