How Some States Are Spending Foreclosure Settlement Money Is Far From Settling
It’s pretty hard to find a single housing advocate or foreclosure defense attorney, myself included, who didn’t find the national mortgage settlement to be, at the very least, flawed.
It may have been a necessary step to getting the housing market back on track, but we know that it didn’t come close to compensating homeowners who had been illegally kicked out of their homes, and in the end, the banks are getting off remarkably light for their robosigning crimes.
Which is why what a multitude of states are doing with some of the banks money is downright revolting.
At least a dozen states are taking tens of millions of dollars in direct payments from the settlement and treating them like a slush fund.
Let me explain.
Part of the settlement included $2.5 billion that was given outright to the states. Florida took in just over $334 million.
The settlement calls for these dollars to be used to “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 or deceptive acts or practices and to compensate the States for costs resulting from the alleged unlawful conduct of the Defendants.”
But much like much of the settlement overall, there is nothing in this language that has any real measure of enforcement. Some states are flat out ignoring these instructions and doing whatever they want with the money they are getting off the backs of good honest homeowners.
A new report from a national affording housing group called Enterprise Community Partners identifies 9 states that are using only part of their settlement money as it was intended. And 6 aren’t using a single dime to address the foreclosure crisis, according to the report.
And that was before California governor Jerry Brown declared his intentions to use his $410 million to fix gaps in his budget.
Texas is putting $125 million, the overwhelming bulk of the money it received, into its general fund. Missouri? Its $40 million is going to cover education cuts. Wisconsin is giving only $3 million to investigate mortgage fraud, but $26 million to their state budget.
Thankfully Florida seems to be doing everything right by seeking the public’s input on how to best spend its money. Hopefully Rick Scott won’t be tempted by his $300 million windfall, as so many other governors apparently have.
If the attorneys general allow this to stand without a dogfight, then the foreclosure settlement will become an even bigger laughing stock than it already is.
Of course they allowed the kind of vague language and that is now being exploited by these abuses, and they really have only themselves to blame. Many critics think the settlement lacks teeth and won’t do anything to help homeowners.
How exactly, with all these budgetary moves change that perception? Politicians can talk about how the foreclosure crisis decimated their budgets, but taking this money away from homeowners is nothing less than a shakedown.
It’s inexcusable and it yet again shows how little some politicians truly understand about what the banks have done to the economy and our nation. And what will happen in these states if foreclosures continue to rise?
What was the point of the protracted negotiations over the mortgage settlement, or Obama’s dog-and-pony show when it was announced, if homeowners in some states won’t see a single dime?
Homeowners must feel like Charlie Brown right after Lucy took away the football.