A couple days ago, Pro Publica basically took information compiled by housing groups and packaged in the New York Times on the raids by the states of hard-dollar funds from the foreclosure fraud settlement and did a deeper analysis. They now show that the raids have reached nearly $1 billion, out of a $2.5 billion commitment. This pencils out to about 40% of the funds going to fill budget holes rather than help homeowners. And as I’ve noted, even some of the “housing” purposes being funded with the settlement money are dubious – I don’t think giving free lodging to police officers in North Dakota’s boom areas constitutes the kind of help to homeowners that the settlement envisioned, to use but one example.
These are preliminary numbers, by the way. Only ten states have thus far finalized the process for dealing with the settlement funds; most of the rest will do so by the end of the fiscal year, which for the bulk of states is June 30. So this has the potential to get better or worse, though my money’s on the latter. The state-by-state breakdown from Pro Publica is here, Over $1 billion is unallocated, according to Pro Publica’s numbers. And even those allocations could change if a movement to divert the funds back toward homeowners succeeds, or legislatures shift the money back into the General Funds. So a lot’s in flux here. But from the Pro Publica analysis, you can see that, just based on the current tally, of the money that has actually been earmarked for allocation, about 63% has gone into general funds rather than toward help for homeowners or investigations into financial fraud.
The report broke some news, that Florida has admitted to diverting a chunk of their funds into the state’s coffers.
Out of $334 million in cash payments sent to Florida in a multi-billion dollar mortgage settlement with major banks, about $33.4 million will go to help bolster the state’s budget [...]
A spokeswoman for Attorney General Pam Bondi—who negotiated the settlement– confirmed that 10 percent of the cash has been sent to the general fund.
“Ten percent went to the state of Florida as a penalty,” she said. “That money goes to GR (general revenue).”
Florida’s total take in the overall $25 billion settlement—which includes principle writedowns and mortgage modifications–is worth about $8.4 billion.
Meanwhile, the defenders of this raid on homeowners have decided to come out of the woodwork. In California, the state’s Legislative Analyst, basically the equivalent of the head of the CBO, strongly supported Jerry Brown’s raid on settlement funds, saying not only that it “makes sense” but that more should be pulled forward in the first year (Brown only uses $292 million out of $410 in the first year, reserving the rest for a raid in the next fiscal year). I assume the Legislative Analyst has a nice home and he’s not underwater on his mortgage.
Then there’s the claim that states are filling budget holes that otherwise would lead to cuts that would devastate the same communities that have these housing problems. I don’t even know how you would begin to prove that assertion, but I know this. Banks broke the law by abusing borrowers and committing fraud in state courts. They didn’t pay a penalty so corporate tax cuts could be maintained, or enterprise funds could be created to bring in jobs, or education budgets could be propped up (all of which are examples of where settlement money is going). There’s a very real and direct through-line between the penalty, which by the way is completely insufficient, and the intended beneficiaries. And that has been severed. As a consequence, homeowners fighting still-illegal practices by lenders in court will not be able to afford representation. Homeowners fighting still-abusive servicers will not get legal help or counseling to stay in their homes. These aren’t minor side effects. We’re talking about the fundamental human need for shelter.




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David — TYPO ALERT:
Isn’t the settlement supposedly $25 bil, not $2.5 billion?
RE CA; I think the finger can point to this guy, who, from this paper is one of those economists who think human behaviour can be quantified.
This is oh so typical of our pols. And really, I’m pretty sure this was the game plan all along. It’s probably the way they got the state AGs to go along with the settlement. You know, an unspoken understanding that the states could rape the funds and help themselves rather than the homeowners.
The purpose of the “settlement” was to give the bankers a get out of free jail card for their ongoing-criminal fraud upon the courts. The secondary purpose was to give Obama a great talking point about how he’s “helping” homeowners, which the complicit corporate media is relaying without question.
There were no other purposes to this travesty, and any help that homeowners actual do receive (with the provisio that the “help” will retroactively wipe away the criminal fraud that was perpetrated against them by the bankers)is purely incidental.
More kabuki to show us how there have not been any crimes committed, but out of the goodness of their hearts of our ‘leaders’ will provide funds to help home owners. What? the home owners will probably never see a penny of this? Oh well, we tried, but as you can see no one is to blame for anything. It’s OK if the states use the money for their budgets instead of what it was intended for. It’s kinda like trickle-down economics.
“Homeowners fighting still-abusive servicers will not get legal help or counseling to stay in their homes.”
You ain’t just whistling Dixie with this Dave! While I can’t claim my servicer is abusing me since I’ve been dealing with them through the court on my foreclosure (which carries its own abuse), and I do have legal help (though he’s been working without pay for quite some time), there is no counseling help available to me that would do anything toward keeping me in my home. So even though my situation doesn’t sound that bad, it’s been highly stressful and debilitating to my health. Last week I started thinking that being homeless had to be easier than continuing the fight to just have a roof over my head!
The buying of the bubble from the bubble creators looks correct, to me.
Except the taxpayer is paying for much of the loss sharing.
This isn’t to be taken as legal advice, as it’s simply sensible doubting
that any market participant should understandably have. But I wouldn’t trust the title of a foreclosure part and parcel to an MBS absent an independent look at the title chain, particularly looking for whomever would be an unspoken for lienholder, especially at the moment of a
would be settlement, that apart from tracing the current conveyor every step back to the original. I don’t know that I could happily rely on the title insurer. And, where a settlement occurs but with other lienholders present but not participating (again not legal advice–get your own,) I really doubt the title insurer has seen anything like it before, and, I
honestly don’t know what quitclaim value a settlement’s supposed to have.
After all, if someone’s foreclosed, and his first was sold, there was
still nothing stopping him (absent a clause) from earlier adding a second.
What about that lender? It could simply be a home equity line from
a broker (and not one owned by the foreclosing bank.)
I agree with all the doubts expressed.
There are two additional areas I would have questions in.
Aside from $US trillions in virtually free reserves extended to the
TBTF banks by Bernanke at the expense of the earning power of everyone
else’s savings, including those of all who did the EXACT OPPOSITE of those
banks, that is, they sold the bubble (they made the RIGHT decision,)
the Fed has purchased $100′s billions in those banks’ MBS’s.
That’s a form of indirect lending power that just as well could have
been devoted to, say, free tuition. And that would represent an
investment indeed.
On the other hand, when the Fed sells the MBS’s, and when interest rates rise from the level of the Liquidity Trap, it, of course, will require less equity for the equivalent return. So the free interest reserves and the MBS purchases seem to be, if I’m not mistaken, a sure-fire give not just in interest to those banks but in an interest rate hit on the MBS’s as well, I would guess (I’m always legally defensive–I don’t know that interest rates will/won’t reflect near free reserves for bad banks forever or that Bernanke will/won’t be changing reserve accounts forever while
then necessarily letting employment suffer forever lest inflation break out, even if it means a generation lost to a mortgage derivatives Ponzi scheme,) indirectly against the taxpayers’ interest.
When the MBS’s are sold at a loss, I don’t see anything stopping the banks
from buying them back. That’s not fencing? That’s not laundering?
Add:
http://www.econmatters.com/2012/04/myth-buster-us-treasury-says-tarp.html
Also:
https://www.google.com/search?rlz=1C1GGGE_enUS395US395&ix=seb&sourceid=chrome&ie=UTF-8&q=US+taxpayers+to+subsidise+%2440bn+housing+settlement
Buying toxic mortgages also could be less stupid looking if the’
buyers are bank proxies aiming to quickly use the taxpayer-supported
loss sharing, and then to simple resell them (that’s different from
the Federal Reserve selling MBS’s at a loss and the banks buying them
back.)
The reserve ratios on the MBS insurance was said to have left the
large banks with 3% liquidity ratios. After the losses are laundered,
the taxpayer will have bought the bubble, those who sold their homes at
the top of the market will have bought the bubble back, they will have
paid for the banks’ loss sharing programs, and the banks will be back
at it, though, with what, 5% liquidity ratios? I don’t think that would
be a happy economy, cause the bubble will have been bought instead of
corrected, those who would have taken the banks’ collateral at the banks’
loss will have been shaken down, saving for retirement will have been
strangled, and the bubble will still be there with only a weaker
support system.
(Still the legal paranoid, this is only a guess too:) I think the
shadow inventory is hugely under-appreciated and only getting worse
faster than you’re buying the loss-sharing and thus subsidizing the
toxic mortgage sales.
Everything middle class will have been hacked. Teachers. Nurses.
Medicare. Social Security.
The Europeans will have been told they pay too much taxes.
(Remember? Europe: a tax and spend mistake?)
The Europeans will have been told they pay too little taxes.
(Remember? It’s more recent: Greeks: you pay too little taxes.
Actually, they pay, I think, about 23% VAT.)
I don’t mean to harp, but hypocrisy, running a mortgage
security Ponzi scheme cause you feel you’re good for it while
sneering at those who complain about it, even as they’re
forced to buy it with student sharecropper-hood and the like,
is like “transference.”
That’s taking a fear/pain experienced and pushing it onto others.
It doesn’t have to be subliminal, though for the bankers
it obviously is.
It can be understood, mastered and
used.
That the bank holding cos. won’t simply suck up their own losses
and get recapped is simply what I call the “Government of Transference”
of the bank holding company owners.
It’s all so obvious and transparent it would be funny if it weren’t
for Capt. Lewis getting strung up and this
http://www.youtube.com/watch?v=n0Wlrslerw0
I’m guessing now being illegal
(note Kovic getting wrongly demonized “communist,” Nixon cynically
using anti-divisive rhetoric when he actually depended on division.)
As to the happy talk, a 3% bump after 2 mos down, with record low
mortgage rates, and an ocean of delinquent properties, with people often unable to move between states if they have pre-existing health issues,
with states laying off people cause of the bubble-induced recession, and
with an accumulating pent up need to sell, and with existing home sales
still a small fraction of the pre-collapse level, I really have to wonder how much is laundering, using the loss sharing, and how much is people
finally throwing in the towel on negative returns on Bernanke’s benchmarking returns to below inflation. Why even do these guys commute
to work in Washington? You can easily force people to buy a bubble,
subsidize loss sharing, or accept negative returns from your netbook.
And when the banks are taxpayer subsidized for placing their overvalued
collateral up for rent, there’s a laugher. The best places to rent, if you sold your home at the top of the bubble, is where, as you’re getting
close to nothing on the proceeds, where you might otherwise have expected to be getting $10,000 annually interest, are, then, where the rent level
will let you survive yet another year or two or three of Bernanke’s
free reserves, and then, if it’s from a large manager experienced in
clumping developments so as to allow it attention to detail and responsiveness to tenant requests, and to allow it to extend really nice amenities across that scale, you can make out pretty well.
If you rent a TBTF bank’s overvalued collateral, I assume the prop at this
point’s starting to look slummy. It could very well have origly been
spec in a nice place and have common amenities. However, where/when there’s a problem with something that’s customarily the landlord’s
responsibility, I wouldn’t want to have to call that bank.
FDL: If this results in a double-posting, what happened was
I edited $10,000 to $10,000′s; then, upon submission, the paragraph
formatting vanished. So I deleted at my account activity. And I’m
thus resubmitting here and now.
what government acting like banksters?
just goes to show the whole finance crises has not been a economic or political problem
but a criminal problem
and its all OK