Massachusetts Attorney General and wanna-be governator, Martha Coakley, has tried to make political capital out of her lawsuit against the FHFA and its wards, Fannie Mae and Freddie Mac, over their policy of refusing to permit the sale of houses to non-profit organizations who intend to resell the home to the borrowers who have defaulted on the loan secured by a loan that is owned by Aunt Fannie or Uncle Freddie. We last discussed the lawsuit in June.
While Martha has publicly trotted out one of the nonprofits involved in this scheme as a paragon of virtue and the Plantonic ideal form of nonprofit rectitude compared to which all other nonprofits are merely a pale reflection, some investigative reporting has uncovered the fact that the CEO of said nonprofit is a campaign contributoer to Ms. Coakley.
Massachusetts Attorney General Martha Coakley stands accused of failing to disclose close ties between her gubernatorial campaign and a nonprofit that’s at the center of the State of Massachusetts’ lawsuit against the Federal Housing Finance Agency, Fannie Mae and Freddie Mac over buyback programs.
According to a new report in The Boston Globe, Elyse Cherry, the CEO of Boston Community Capital, is the co-chair of Coakley’s campaign finance committee.
Cherry’s Boston Community Capital is also the focus of a lawsuit filed by Coakley against the FHFA, Fannie and Freddie, which alleges that Fannie and Freddie, currently under FHFA conservatorship, are refusing to comply with the Massachusetts law called “An Act to Prevent Unnecessary and Unreasonable Foreclosures.”
One of the provisions of the law, which was passed in August 2012, prohibits creditors from blocking home sales to non-profits simply because the non-profit intends to resell the property back to the former homeowner.
In the lawsuit, filed in June, Coakley said that these foreclosure buybacks are exactly what the GSEs are preventing by refusing to engage in the buyback program.
When Coakley filed the lawsuit in June on behalf of the State of Massachusetts, she specifically cited Boston Community Capital’s Stabilizing Urban Neighborhoods Initiative as an example of how the Massachusetts buyback program can work.
But according to the Globe report, Cherry hosted a Coakley fund-raiser mere days before the lawsuit was filed.
From the Globe report:
Though Cherry’s work has drawn high-profile supporters, Coakley’s lawsuit is drawing criticism from a prominent affordable housing advocate who opposes Cherry’s approach and a government ethics champion who says Coakley should have disclosed her ties to Cherry to avoid the appearance she’s doing favors for insiders.
“It’s important that the public knows about private dealings that could potentially affect government action,” said Pam Wilmot, executive director of Common Cause, a nonprofit group that promotes transparency in government.
Coakley said there was no need to file a public disclosure with the State Ethics Commission since Cherry’s $3,250 in state donations to Coakley since 2005, the $1,500 she gave to Coakley’s failed US Senate bid in 2010, and the $5,000 she donated to the Democratic State Committee in September are already matters of public record.
One of the interesting aspects of the criticism of the Cherry-Coak(ley) connection is that much of it is coming not from the Titans of Wall Street, The Top 1%, or Darth Vader, but from folks who you would think would be rising to Coakley's defense. Among these critics is a guy who usually considers no bar is too low to limbo under, as long as the result of dancing under it is the infliction of pain on a lending institution.
Bruce Marks, a longtime housing advocate and chief executive of the Neighborhood Assistance Corporation for America in Jamaica Plain, saidthat Cherry’s buyback program is flawed because Boston Community Capital buys foreclosed-upon homes at a discount from lenders, but doesn’t pass along all the savings to families that were foreclosed upon. Instead, her group typically boosts the resale price by at least 25 percent, Boston-area property records show.
Marks cites Coakley’s yearly salary, $590,000 in 2013, as evidence that she “paints herself as this advocate for the consumer, and it’s the opposite.”
Marks also said that BCC makes money on each home refinance it conducts because BCC marks up the home by 25% above the price it paid to the lender when BCC resells it to the homeowner. According to Marks, borrowers must also bring approximately $5,000 in fees to the closing.
Marks said that BCC charges an interest rate 6.375% for the loans it gives to the previously distressed borrower, which is two percentage points more than what BCC pays for the money it borrows to make the loans.
“If a bank was doing that, you’d charge them with predatory lending,” said Marks, who said his group collects a small fee from banks to help homeowners negotiate a reduced mortgage payment with their lenders.
A two percent spread is predatory lending? C'mon Bruce! Even your running buddies in Havana wouldn't drink that vat of Kool-Aid.
While I doubt that in the Peoples Commonwealth of Massachusetts this particular kerfuffle, standing alone, will cost Martha the governor's crown, the race against Charlie Baker is currently neck-and-neck. When your opponents and a good portion of your supporters gang up to publicly question your conduct on ethical grounds shortly before early voting starts, you're not doing yourself, or the lawsuit that you're waging as much through press releases as through motions and briefs, any favors.