Treasury Secretary Tim Geithner defended Elizabeth Warren's role Tuesday in the ongoing settlement talks between the top mortgage servicers and the state attorneys general and several federal agencies.
In a letter to House Financial Services Committee Chairman Spencer Bachus, Geithner said the Consumer Financial Protection Bureau (CFPB) is providing advice to the settlement process because the agency will eventually be in charge of writing new servicing rules.
Speaking at a Senate Banking Committee hearing on reform of the housing market, Geithner quoted from his own letter after Sen. Richard Shelby asked if Warren, who is the interim head of the CFPB, is playing a significant role in the discussions.
"Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB does not currently have authority to administer penalties, and will, therefore, not be a party to any formal settlement with mortgage servicers," Geithner said. "Under that same law, the CFPB will obtain significant authority to set standards for the mortgage servicing industry on July 21, 2011 — the date when the consumer financial protection functions of other agencies transfer to the CFPB. For this reason, the CFPB has been invited to advise the other agencies on how to design appropriate servicing standards for the mortgage servicing industry."
Shelby, the top panel Republican, also pressed Geithner to answer questions on the settlement talks, including raising concerns about the 27-page term sheet given to the top five servicers by the state AGs two weeks ago. The Treasury chief declined to answer, saying it was an enforcement process and it would be inappropriate for him to discuss it.
Geithner similarly declined to answer questions put to him by Bachus and other House Republicans last week outlining their concerns with the settlement process. In his letter, Geithner only addressed CFPB's role, saying it was appropriate.
Republicans have said Warren should not be involved in the process since she is a presidential-appointee and not confirmed by the Senate, and the CFPB has not yet assumed its full authority.
Warren herself will have a chance to answer such concerns at a scheduled hearing Wednesday in the House Financial Services Committee.
