In the years leading up to the still ongoing foreclosure crisis, abusive lending practices went largely unregulated. The private market created a securitization system to package designed-to-fail mortgages into private label mortgage-backed securities, and Federal regulators largely turned a blind eye to these practices. Now, millions of families have lost their homes to foreclosure. Furthermore, the housing market is still struggling to recover, and lenders have responded by restricting access to credit by tightening underwriting standards.

In reviewing the CFPB’s role and ongoing mortgage market reforms required by Dodd-Frank, it would be short-sighted to forget that lack of regulatory oversight was an undeniable cause of the housing crisis. Creating a single agency with the mandate of protecting consumer interests and instituting reforms to the mortgage market are common sense responses to this hard-hitting crisis. Reversing course and weakening the CFPB or undoing mortgage lending reforms would be a costly step backward that would pave the road toward another housing-related crisis. The value of preventing a future crisis is obvious when considering how harmful the current crisis has been for millions of families. In 2006, which pre-dated the worst of the foreclosure crisis, CRL released a report estimating that abusive and predatory lending would lead to approximately 2.2 million foreclosures among subprime mortgages.1 At the time, our report was denounced by the mortgage industry as absurdly pessimistic. As we all now know, the system was loaded with much more risk than CRL originally reported.

According to a more recent CRL analysis, from early 2007 through the end of 2011, approximately 10.9 million homes had started the foreclosure process.2 A separate CRL research report titled Lost Ground found that, for mortgages originated during the height of the housing bubble (2004-2008), 2.7 million homeowners had already lost their homes to foreclosure by February 2011 and another 3.6 million homeowners were delinquent or in the foreclosure process. The crisis has also pushed housing values low enough where millions of homeowners are now underwater on their mortgages – in other words, they owe more on their mortgage than the home is worth. For the first quarter of 2012, CoreLogic estimates that 11.4 million homeowners were underwater on their mortgage.4 All told, homeowners have lost $7 trillion in home equity as a result of the housing crisis.