BLOG VIEW: Can somebody please send a medical professional to Richard Cordray's office? It appears that the director of the Consumer Financial Protection Bureau (CFPB) either has strep throat or laryngitis or some sort of ailment that prevents him from using his vocal cords.
Or at least that's what I assume is Cordray's problem. After all, he has become completely silent regarding reports that nearly half of the states involved in the $25 billion National Mortgage Settlement are using their direct cash payments portion of the deal – totaling $2.5 billion – for purposes that have absolutely nothing to do with preventing foreclosure and aiding distressed homeowners.
The National Mortgage Settlement provides the states with $2.5 billion in direct cash payments. However, a report published by Enterprise Community Partners, a Washington, D.C.-based affordable-housing organization, found that only 26 states are ‘substantially’ using their settlement funds for housing. Thus, nearly half of the $2.5 billion provided by the settlement in direct cash payments is being spent on wholly unrelated expenditures and follies.
Most of the states are using their money to compensate for their dismal spending habits – California's Gov. Jerry Brown was particularly shameless in hijacking his state's $410 million and using it to fill in a deficit that is close to $16 billion. Georgia is placing all of its $99 million into economic-development endeavors. North Dakota has channeled its $1.9 million to develop housing for law enforcement officers and emergency responders serving the communities around the local oil industry – well, hey, at least there are houses in that idea!
In other states, legislators have left their brains in the statehouse cloakroom and are making wacky plans for their settlement funds. Over in South Carolina, Republicans in the House of Representatives want to spend all of their $31 million on efforts to encourage businesses to relocate to the Palmetto State. The Virginia legislature is mulling the idea of giving $1 million of its $66.5 million to the State Corporation Commission's Bureau of Financial Institutions, while the rest of the loot is split between financing municipal governments and covering the costs of a 3% pay raise for state civil servants.
And what does the settlement text say about how the states are to use their funds? The exact language is as follows: ‘To the extent practicable, such funds shall be used for purposes intended to avoid preventable foreclosures, to ameliorate the effects of the foreclosure crisis, to enhance law enforcement efforts to prevent and prosecute financial fraud or unfair and deceptive acts or practices, and to compensate the states for costs resulting from the alleged unlawful conduct of the defendants.’
Yes, you may have noticed that the text did not give a wink and a nod to using the settlement's billions to finance pay raises for state employees, build homes for North Dakota cops or get Joe Entrepreneur to move this corporate headquarters to Myrtle Beach. Needless to say, nearly half of the states have left their distressed homeowners with nary a penny of financial aid.
Which leads me to wonder: Why isn't the CFPB voicing its consternation over this? After all, Cordray helped spearhead the settlement talks when he was still the attorney general of Ohio, and he has spent his first six months as the recess-appointed CFPB director in a seemingly nonstop harangue of how the financial services industry is supposedly harming homeowners. Throughout the long settlement negotiation process and in the months after the settlement was reached, Cordray has acted like a latter day political version of Crusader Rabbit: hopping to the rescue of U.S. homeowners with indefatigable gallantry and an unvanquished spirit.
So, where is Cordray and his sense of outrage? Obviously, this high-decibel guardian of consumers must have lost his voice – otherwise, why isn't he saying a word about this outrageous scandal?
Perhaps when Cordray gets his voice back, he might want to start scolding the folks in his home state. After all, the municipal government in Cleveland is receiving approximately $72 million of Ohio's $335 million in settlement funds – and none of the money is going to help the city's homeowners. Instead, all of Cleveland's millions are going to demolish empty and dilapidated foreclosed homes throughout the city.
But, on second thought, maybe Cordray should leave Cleveland alone. Really, I can't think of a better symbol for government at work: a wrecking ball.
– Phil Hall, editor, MortgageOrb
(Please address all comments regarding this opinion column to hallp@mortgageorb.com.)
