Cordray Not Impressed by Bush's Proposal to Assist Mortgage Borrowers at Risk

Cross-posted at my new location, Ohio Daily Blog:

This morning President Bush outlined a relatively modest proposal to assist some of the mortgage borrowers at risk of losing their homes. (He also urged passage of helpful tax changes proposed by Sens. George Voinovich (R-OH) and Debbie Stabenow (D-MI.) However, Bush minimized the extent of the overall problem, saying that the "recent disturbances" in the subprime mortgage industry are "modest in relation to the size of our economy," and emphasizing that it is "not the federal government's job" to bail out the mortgage lending industry. The Bush administration continues to oppose measures such as new laws to prevent lenders from steering low-income borrowers into riskier loans or raising the investment limits on Fannie Mae and Freddie Mac so they can buy more mortgages.

Ohio Treasurer Rich Cordray (D-Grove City) was quick to react to the President's proposal. While "somewhat heartened," Cordray is "concerned that action by federal agencies is long overdue and will be far too little":

I have been immersed in the foreclosure problem at the local and state level and I can say with confidence that its effect on the economy is in no way "modest" ...

The U.S. Census Bureau earlier this week ranked the poorest cities in America. The only state with two cities in the top five was Ohio. This is not surprising for a state that has been a national leader in foreclosures for the past decade and experiences at least one foreclosure filing for every 71 households in the state.

The greatest tragedy is when families lose their homes, but the cascade of problems is extensive. Neighborhoods with vacant foreclosed properties decline. Property values sink. Other homeowners cannot afford to sell their homes. Local government services supported by property values suffer greatly as the need for services spikes. There are other less obvious problems: in some Ohio counties, for example, sheriffs must devote up to half of their work week to conducting foreclosure sales. ...

Some authorities - including those at the federal level - may say this is a ripple effect which can be handled. I see that ripple building to an economic and social tsunami: In Ohio, between 150,000 to 200,000 borrowers hold subprime mortgages with so-called ‘exploding ARMS’ which are beginning to reset now and which will continue to reset at large levels.

The president’s plan will help 80,000 homeowners across the nation and I can say with certainty every one of them will need it. But it will not be enough: in 2006 there were 79,072 new foreclosure filings - in Ohio alone.”

Cordray gets it. The foreclosure crisis in Ohio is like nothing seen here since the Great Depression. Strong measures are needed, and soon, or Bush's rosy comments about the strength of the overall economy eventually may be inducted into the same Hall of Shame as President Herbert Hoover's announcement in February 1930 that the preliminary shock of the stock market crash had passed and employment was on the mend.