2Center for American Progress | What the Fair Credit Reporting Act Should Teach Us About Mortgage Servicing
o creaion o he Fair Credi eporing Ac in 1970—harms o consumers whenhe large nancial companies responsible or consumers’ credi raings served heineress o heir major corporae cliens raher han consumers. Ta marke ailureour decades ago was correced by FCR, which requires he hree big credi raingagencies—Equiax, Experian, and ransUnion—o give individuals he righ osee heir credi hisory and o correc misakes. Over ime, Congress srenghenedhese consumer proecions under FCR, noably in overhauls in 1996 and 2004.Ta same marke ailure correced by FCR in consumer nance is now readily apparen in he morgage servicing markeplace. Aer all, some o he biggesconsumer issues in a amily’s lie—wheher hey can say in heir home, on whaerms, and paying how much in ees—is a realm o nance over which consumers boas litle o no leverage. Wha’s more, morgage servicing righs are no speci-cally addressed in he nancial regulaory reorm law passed by Congress las year.Te upsho: An eecive se o consumer proecion rules should be a prioriy o nancial regulaors, he new 112h Congress, and he Obama adminisraion inhe response no jus o he robo-signing scandals bu also he creaion o our nexgeneraion o housing nance as Congress and he adminisraion grapple wihhow o replace he morgage nance roles played by Fannie Mae and Freddie Mac.Tis issue brie oers some progressive recommendaions or how his could bedone o he bene o consumers and our morgage nance sysem.
From robo-signing to investor concerns
A series o congressional hearings lae las year regarding he “robo-signing” scan-dal raised he quesion o wha o do abou morgage servicing righs. Te robo-signing scandal involved employees o major servicing companies who admitedha hey rouinely, alsely signed documens under oah in cour cases. OnceCongress and he press began o look under he hood o servicing pracices, oherserious problems emerged, including he quesion in many cases abou wheherservicers ollowed he requiremens or endorsing he “noes” (proo o owner-ship o a loan) as required beore a oreclosure can legally occur.Te robo-signing hearings brough new atenion o longsanding complains aboumorgage servicers. Te Obama adminisraion’s Home Aordable MorgageProgram, or HAMP, a morgage-modicaion program or embatled bu credi-