The Executive Director of the Delaware Community Reinvestment Action Council, Rashmi Rangan says a suit has been filed against state officials over a decision approved by the General Assembly and signed by Gov. Jack Markell to use funds from a mortgage settlement to balance the state budget.
Concern over the action was first reported in DelawareBusinessDaily.com, the predecessor to Delaware Business Now. Click here for past stories.
At the time, state officials downplayed the situation and recently, the Joint Finance Committee of the General Assembly approved spending additional funds from the settlement to beef up the work of police in Dover and Wilmington.
That move drew fire from some legislators.
Markell spokesperson Kelly Bachman said the administration does not comment on pending litigation.
The council and Rangan had previously asked the U.S. Attorney General to investigate the decision by the state.
A lawsuit over the use of settlement money for balancing the budget was previously filed in California.
The Delaware suit seeks an injunction prohibiting Delaware and its officials from appropriating or spending $31 million in funds obtained from Bank of America.
The bank admitted no guilt but agreed to pay the money over allegations of poor business practices regarding mortgages. The wave of foreclosures that resulted from poor documentation, issuing loans more than the value of homes and even cases of fraud, threatened to sink the U.S. financial system in 2008 and 2009.
Bank of America’s actions caused harm to homeowners in Delaware by inflating the values of their homes, leaving them saddled with mortgages they couldn’t afford and properties with little or even negative equity. Lower income neighborhoods in the State were adversely affected in that conditions were created which led to increased home vacancies and concomitant increases in deterioration and crime, a release from the investment council, Rangan stated.
According to Rangan, “despite the clear and unambiguous conditions in the Settlement Agreement setting out how this $31 million is to be obligated, as well as official public statements by the Governor and other Delaware elected officials confirming the targeted nature of this money, the Governor and others have failed and refused to carry out the intent of the Settlement Agreement. Rather, the governor and other Delaware elected officials have obligated a significant portion of this $31 million to unintended uses to balance the state’s budget.”
Rangan said that after no response from the state, she concluded that the filing of a law suit is the only effective remedy to force the governor and other elected Delaware officials to abide by their obligations as public servants to make whole a community that was egregiously exploited during the mortgage crises
Rangan said that the “$31 million was wrested from Bank of America by Delaware under the patina of its authority to enforce state statutes and common law. Unless enjoined and restrained by judicial order, the governor and other elected Delaware officials will shamelessly transfer funds intended for poverty-stricken communities of mortgage fraud to programs that are wholly unrelated to Delaware’s legal authority to demand and receive $31 million from Bank of America and, in exchange for which, Delaware now holds harmless Bank of America from legal actions that could arise from a host of administrative and civil claims under Delaware statutes and common law.”
The council monitors the actions of financial institutions in meeting Community Reinvestment Act requirements. It also spearheaded efforts to form a credit union to aid residents who often fall victim to payday loans and other high-interest-rate options that are legal in the state, but not elsewhere.