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) -- The Consumer Financial Protection Bureau (CFPB) would be the perfect agency to deal with the foreclosure crisis that's now rearing its ugly head -- too bad it may take years to get off the ground.

In fact, its first priority has nothing to do with foreclosures at all - just the opposite.

As bank repossessions broke new records last month - and a couple weeks before the "robosigning" scandal emerged - the CFPB held its first official discussion. On Sept. 21, Elizabeth Warren, who championed the agency, and U.S. Treasury Secretary Timothy Geithner, decided to take a good, hard look at how to clarify mortgage documents for new home purchases instead.

"Too often, families come to understand the legalese only when they get bitten by it," Warren said at the time, referring to disclosure forms for new mortgages. She added that "borrowers receive stacks of incomprehensible paperwork when they're looking for a loan."

Nevermind when the loan is looking to bite them with a foreclosure notice on the front porch.

Of course, the discussion seems ironically amiss only in hindsight, as the plight of borrowers pleading with banks and judges on the court house steps has become evident. As Bill Clinton might have said in 1992, "It's the foreclosures, stupid" - at least at the moment - not the originations.

Furthermore, even if the CFPB were examining foreclosure documents instead, it wouldn't do much good to quell the current mayhem. Warren and Geithner are working together to get the agency staffed and moving. But as Dan Seiver, a professor of economics and finance at San Diego State University, notes: "They may have hearings, but

they don't even have a director."

>>> Read More: Obama Sidesteps Battle Over Consumer Protection

The idea of a single agency devoted to protecting consumers would be a wonderful thing. Particularly right now, as dozens of state and federal authorities climb over one another with competing goals to examine the situation instead:


Attorneys general:

All 50 state attorneys general have banded together to investigate and potentially prosecute big banks. At issue is the practice of signing off on thousands of foreclosure documents without properly vetting information. However, foreclosure practices vary state-by-state, with some requiring judicial approval and others not. As a result, it could take up to seven months to kick a Delaware homeowner out of his home, but fewer than 30 days to do so in Texas.

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Congress and state legislators have gotten on their soap boxes to call for a halt in foreclosure proceedings. Some advocate a temporary delay, citing economic risk, while others call for an extended, nationwide moratorium until borrowers can get back on their feet. After Election Day, the legislative chorus is expected to die down.


The President:

On the other hand, the White House has stood firmly against such suggestions - with a keen eye to politics as well. The administration has faced criticism from business leaders and free-market advocates for stepping too far into the private market, and a mandated, nationwide moratorium would only bolster that view. President Obama's senior political adviser David Axelrod suggested last weekend that banks should sort out the issue on their own, noting that "there are, in fact, valid foreclosures that probably should go forward."


Federal regulators:

The Treasury Department was the first federal agency to take action as problems mounted, though it didn't necessarily mete out any corrective action. Its Office of the Comptroller of the Currency directed seven of the largest mortgage servicers -

Bank of America

(BAC) - Get Bank of America Corp Report


Wells Fargo

(WFC) - Get Wells Fargo & Company Report


JPMorgan Chase

(JPM) - Get JPMorgan Chase & Co. Report



(C) - Get Citigroup Inc. Report


U.S. Bancorp

(USB) - Get U.S. Bancorp Report


PNC Financial Services

(PNC) - Get PNC Financial Services Group, Inc. Report




- to review their foreclosure practices. The

Federal Reserve

, meanwhile, doesn't seem to have done much of anything. That agency still has oversight of unfair and deceptive mortgage practices and will have key responsibility for overseeing systemic risk.

Despite the various government arms that are tasked with representing consumers' best interest, from an average homeowner's point of view, there seems to be none.

>>>Read More: Mortgage Mailbag: Homeowners Speak Up

For instance, Michael and Jamie Sowers, of Little Rock, Ark., are distressed borrowers who had trouble paying their mortgages. They received conflicting information from their servicer, Bank of America. The Sowerses contacted HOPE NOW, an alliance between the federal government and mortgage participants, to assist in the process. By late summer, the couple believed they had gotten a workable solution. By Aug. 16, though, Bank of America sent notification that the couple's home had been placed in foreclosure.

"And then on August 26th

we received the certified letter from the attorney with a sale date of Sept. 23, 2010 at 12 p.m. on the courthouse steps!!" Jamie Sowers writes in an email. "We are in non-judicial foreclosure so it is very fast and without anyone (or anyone sane at least) looking at the process."

Seiver, the S.D.S.U. professor, who has a PhD in economics, says it's not just "Average Joe" who's encountering problems with mortgage documents. He had the same issue when buying a home in Southern California during the bubble.

By questioning legal jargon in the documents - as well as the inflated price of the home and costs of closing - Seiver says he upset the bankers, lawyers and real-estate gurus who were involved in the process.

"I had to sign massive numbers of papers and I had to read what I was signing," says Seiver. "I would say, 'Why do I have to sign this form saying I'm aware that I just signed the previous form?' I was getting everybody in the room upset, 'cause you weren't supposed to actually do that."

Needless to say, Seiver's home didn't rise another 20% in value the next year, either, as he had been told it would.

Joseph Lynyak, a partner at Venable LLP who advises large mortgage servicers on legal issues, says the CFPB would theoretically be able to trump state laws because federal preemption rights regarding "Unfair or Deceptive Acts and Practices."

"They can wade into this issue, but that's July of next year, and I'm sure they'll have other stuff on their plate by then," says Lynyak.

Lauren Saunders, managing attorney for the National Consumer Law Center, doesn't think that's likely. And anyway, she says, the problem is less about pre-emption than about someone - anyone - cracking down on the "sloppiness" that pervades banks' documentation practices.

"While we think that judicial foreclosure is a preferable route, I don't see the federal government getting involved in mandating judicial foreclosure because the procedures are generally a state-law issue that the federal government could change, but is unlikely to," says Saunders. "What would be more appropriate would be for it to stop the problems at the outer edge - the unfair, deceptive, abusive practices, not so much regulate the procedure."

The Consumer Financial Protection Bureau will be responsible for doing just that. But for the time being, simply nominating a director became a bruising partisan battle that had to be sidestepped. Warren may have championed the idea of the agency years ahead of the crisis, but President Obama named her "assistant to the president and special advisor to the Treasury Secretary."

As Warren and Timothy Geithner discuss ways to simplify disclosure forms for new mortgages, there's no one in charge of the vintage home loans still "biting" consumers, to use Warren's metaphor. Millions of consumers the CFPB is charged with serving will be out on the street before the agency gets off the ground.

"It will be years before the CFPB will really have an impact on anything," says Seiver. "It doesn't even have baby teeth yet. Eventually it'll get some very sharp fangs but it doesn't have anything to chomp on anybody right now."

-- Written by Lauren Tara LaCapra in New York


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