The state office in charge of regulating mortgage companies and commercial banks can?t keep track of its own money, much less ensure the integrity of Maryland?s financial institutions.
A Department of Legislative Services audit released Thursday said the Office of the Commissioner of Financial Regulation was loose with cash, failed to examine mortgage lenders on a timely basis and did not review business licenses to ensure only those with proper credit ratings and insurance operate in the state, among other issues. Funny how the audit period ? April 20, 2004 to May 6, 2007 ? coincides with a flurry of subprime lending followed by major credit tightening and a decline in housing prices in Maryland and the nation.
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Gov. Robert Ehrlich is heavily to blame for the poor oversight during this period as Gov. Martin O?Malley took office only five months before the end of the reporting period.
But given the severity of the housing meltdown both nationally and locally, we wonder why O?Malley did not immediately upon entering office direct his attention to OCFR instead of pushing a tax plan to solve a deficit that may or may not exist since he never released a budget to backup his numbers. According to the audit, as of June 2007, “examinations for 13 of 20 mortgage lenders tested were overdue for periods ranging from 2 to 25 months.” Lax oversight does not necessarily mean more fraud, but strict scrutiny surely can prevent it.
And the state needed it. According to a recent report by the Baltimore Homeownership Preservation Coalition, “In 2004, high cost loans comprised 13.4 percent of the purchase loans originated to homeowners; by 2006, high cost loans accounted for 33.2 percent of the lending activity.” The same study estimated subprime foreclosures could make property values drop $2.73 billion and result in a loss of $19.1 million in tax revenue by the end of 2009 in Maryland.
Sarah Bloom Raskin, the new Commissioner of Financial Regulation, blames a shortage of personnel caused by low wages for many of the problems. If that is the case, why not try merit pay or offer bonus pay for positions that surely rank as some of the most important in state government?
Why not also work with the attorney general?s office to outline how the two offices can work together to prosecute mortgage fraud. Neither office could return information by press time about the number of outstanding cases against lenders, but we will follow the story.
The government can not stop greed on the part of borrowers and lenders, but it can unearth illegal or inappropriate activity and deny those lenders the ability to operate in Maryland.
More foreclosures only means less money for schools and other key government functions.
