The federal government has joined a growing number of states ininvestigating and prosecuting “robo-signing” and notarial misconduct within the mortgage industry with the appointment of former Ohio Attorney General Richard Cordray as the first director of the new Consumer Financial Protection Bureau (CFPB).
Formed last year in response to widespread fraud and financial scandals, the CFPB is charged with oversight and enforcement authority over America’s mortgage servicers and other financial institutions, which includes so-called “nonbank organizations” such as mortgage brokers and servicers, credit reporting agencies and payday loan companies.
“Many of these institutions had no regular federal oversight in the run up to the financial crisis,” Cordray said in a statement. “They led a race to the bottom and greatly harmed consumers.”
The “robo-signing” crisis has starkly revealed the consequences of ignoring or willingly abandoning sound, legal notarial practices. The establishment of the CFPB — along with recent state actions and growing risk management concerns among corporate boards — illustrates that bothNotaries and their supervisors are obligated to know and strictly follow state laws and sound notarial practices to avoid risk.
Cordray said the agency’s examiners have already started looking at major banks, “reviewing documents and asking tough questions” about how they are complying with consumer protection laws. In the coming months, other financial organizations will begin to come under the same scrutiny.
Michael Lewis is Managing Editor at the National Notary Association.