CHRIS SEWARD - cseward@newsobserver.comMark Pearce has been a state bank regulator since 2006.Mark Pearce is North Carolina's point-man for wrestling the foreclosure crisis, an unabashed ally of struggling borrowers.
Now he's headed to Washington, D.C., for a new kind of advocacy, leading the newly created consumer protection unit of the Federal Deposit Insurance Corp.
Pearce, the state's chief deputy commissioner of banks, leaves behind a legacy of fighting for poor and minority borrowers. He developed the N.C. Foreclosure Prevention Project, helped win millions in consumer refunds from Beazer Homes and other lenders, and fought for stricter licensing requirements for mortgage brokers. At his previous job, as president of the Center for Responsible Lending in Durham, he worked on banning payday lenders from the state.
But he also leaves behind a state where foreclosures keep ticking up. North Carolina had nearly 53,000 foreclosure starts through September - meaning the state is on track for yet another record number of lost homes. North Carolina had about 63,000 foreclosure starts in all of 2009, and about 54,000 in 2008.
That's why Pearce, 40, says his job is never really finished.
At the FDIC, Pearce will be the first director of the new Division of Depositor and Consumer Protection, helping the agency navigate new responsibilities it's taking on under the Dodd-Frank bill, including stepped-up supervision of community bank loans and, for the first time, monitoring investment banks and other financial firms that are not FDIC-insured.
Pearce joined the N.C. Bank Commissioner's office in 2006, hired to help regulate nonbanks such as mortgage brokers, check-cashers and tax-refund dealers. It's not clear who might replace him.
Pearce, a Raleigh native, starts his new job next month and will move with his family from Durham to the Washington area. He spoke by telephone Thursday with The Charlotte Observer. Questions and answers have been edited for clarity and length.
Q. We're on track for another record year for foreclosures in North Carolina. So is your work here really finished?
I don't know if this work is ever finished. You always need to have knowledgeable and experienced people like we have here to monitor the activity of mortgage companies and banks and make sure the public interest is protected.
Q. Right. But foreclosures are still going up.
North Carolina has one of the lower rates of foreclosure. We've done things here that other states haven't, and we've had fewer of the loans that caused problems in other states. Back in the late '90s, North Carolina was passing laws that addressed predatory lending.
Everyone would always like to do more than they've been able to do, but at the same time you realize that not every foreclosure can be avoided. But even in those situations you can make that transition out of a home better than having to go through the foreclosure process.
Q. How?
Short sales are an option, though they don't work quite as well as they should. Some companies are experimenting with deeds in lieu where you simply turn the house over to the mortgage company and they sometimes will help a family with moving expenses.
Q. We seem to go through a lot of different trends as far as figuring out the best way to solve the foreclosure crisis. So what's the right answer?
When the new programs come out there's a lot of optimism, but I don't think we've seen a program that has worked as well as people hoped. We've consistently been playing catch-up and doing things that are insufficient to address the problem. We have millions of people struggling to pay their mortgages when property values are declining nationwide, and that needs big solutions.
Q. So what's a big solution?
We make the process too hard. A lot of homeowners are trying really hard, but then paperwork gets lost, or [they're rejected because of] the way the loan was made five years ago. We've had people who were offered loan modifications and then they find out down the road that they actually didn't qualify. We've recently finalized a rule that said mortgage companies can't proceed with a foreclosure while they're still working with a homeowner to modify the loan. How can you do those two things at the same time?
Q. What problems are we still facing in North Carolina?
We've had high unemployment, and I think you're going to see a high level of foreclosures whenever you have a challenging economy. So we need a good recovery, and then the housing market will work itself out.
Q. So if the answer is just that the economy needs to improve, why have all these government agencies to address the housing crisis?
There are things that can be done in foreclosure prevention that would enable that [improved economy] to happen sooner. I hear a lot of talk about big government, but I'm not sure I see it. Certainly at the state level in North Carolina, we've been going in the opposite direction.
Q. How do you view your role with the banks? Are you their antagonist?
As a regulator, your job is to make sure that people play by the rules. It's not so much that everybody is a bad guy and we're going after them, but you go after the bad guys so that the good guys can have fair competition in the marketplace. That's where the consumers benefit.
Q. What do you say to homeowners who have worked hard to stay current on their payments, and they don't want their irresponsible neighbors to get bailed out?
It's true, most people with mortgage loans are making their payments, and there is understandable concern about someone getting a deal that others aren't. That being said, when you sell your house, do you want to have three foreclosures on your street? Foreclosures don't just affect individual families; they affect neighborhoods, the local government, social services, the economy.
Q. I was a little surprised to hear about your new job because you've been a strong advocate for state-level regulators.
I believe that states and federal government ought to work together. We should have strong federal rules, and if states want to add protections, they should do that. We need more cops on the beat, not less. The FDIC has a long history of working with state regulators. Where I have concern is when the federal government thinks it has the only solution and states don't have a role to play - this [mentality of] "one size fits all, all answers come from Washington."
Q. Is your boss going to end up in D.C. too? (Commissioner Joseph Smith is rumored to be in the running to head the Office of the Comptroller of the Currency, which regulates national banks.)
He certainly would do a great job in Washington, D.C., just as he's done in North Carolina. But he's going to have to answer those tough questions.
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