Richard Cordray may bolt the CFPB rather than face a contentious confirmation battle

With the dismaying foreclosure fraud settlement in the rear view mirror and happy days here again for the housing market (at least that’s what the analysts tell me), you’d be surprised to know that lenders continue to work their hardest to rip off their customers. Two regulators have opened an investigation into their deceptive marketing tactics:

The Federal Trade Commission and the Consumer Financial Protection Bureau said Monday that they’d opened 19 investigations after a joint “sweep” of more than 800 ads. They also issued 32 warning letters to lenders and brokers.

“Misrepresentations in advertising for mortgage products pose a significant risk of harm to consumers because they can confuse and mislead consumers when they are making one of the biggest financial transactions of their lives,” said Kent Markus, the consumer bureau’s assistant director of enforcement. “Those problems can be particularly significant for veterans and older Americans.”

Regulators reviewed mortgage ads in newspapers, direct mail and on the Internet – including on Facebook – for violations of the “2011 Mortgage Acts and Practices – Advertising Rule,” which prohibits unfair or misleading advertising for any mortgage credit product, from costs and payments to interest rates and fees. Advertisers that violate the rule could face fines.

“Mortgage advertisers are on notice that they have to comply with the law,” said Thomas Pahl, an assistant director in the FTC’s division of financial practices.

The agencies did not release the names of the companies that received letters or that are under investigation.

Considering how well this worked out the last time, I’m sure that the lenders are none too worried. And this is really the main legacy of the settlement. It put such a low price on misconduct that it invited more down the road. These unidentified lenders use official logos in their materials to make it look like they have an association with the VA, HUD or the FHA. The ads throw around the term “fixed rate” without disclosing whether the rate offered is, well, fixed. The ads contain big novelty checks to connote pre-approval for a cash-out refinance or a reverse mortgage, and pretend that, in the case of a reverse mortgage, no payments would ensue, when the borrower remains responsible for tax and insurance payments.

What this means is that mortgage lending remains a grift. This isn’t exactly a new revelation, but after causing the greatest financial crisis since the Great Depression, you would have thought regulators would make a point of emphasis out of ending the grift. That is actually the point of emphasis for CFPB, and I’m glad they opened this investigation. But we’re nearly six years removed from the housing collapse.

On a related note, the Washington Post reports that Richard Cordray may bolt from the agency rather than face a contentious confirmation battle at the end of 2013. His recess appointment expires at that time. Cordray is definitely a political animal, and he’s been touted as the Democratic gubernatorial candidate in Ohio. But really anyone seeking to fill that position at CFPB will have a tough time getting confirmed in the Senate. And why shouldn’t they, after all, who ever heard of a federal agency trying to stop banks and lenders ripping off their customers?