National Mortgage Settlement: Some States Using Mortgage Deal Funds To Close Budget Gaps

Well, that was fast.

Two states have already announced that they won't be using all of their share of the $25 billion allocated in Thursday's historic foreclosure settlement to pay its intended recipients -- the homeowners and borrowers who saw the housing market collapse beneath their feet.

Instead, in some areas, a share of those dollars is likely to be diverted to state budgets, in a bid to offset some of the massive deficits that states have been struggling with since the economic downturn, according to reports.

In Wisconsin, Governor Scott Walker and state Attorney General J.B. Van Hollen have announced plans to use $25.6 million of the settlement money -- about 18 percent of the $140 million Wisconsin will get in total -- to plug holes in the state's budget, according to the Milwaukee Journal Sentinel. As the MJS notes, this is a reversal of Walker's previous opposition to using legal settlements to close budget gaps.

Meanwhile, in Missouri, state Attorney General Chris Koster has said that he plans to put $40 million of Missouri's settlement money -- about 20 percent of the total $196 million -- into the general state fund, apparently in response to Governor Jay Nixon's call for a stronger college and university budget, Stateline reported.

In the wake of Missouri and Wisconsin's announcements to use the settlement funds for purposes other than directly assisting borrowers -- and with similar announcements possibly forthcoming from other states -- critics have begun comparing Thursday's deal to the 1998 tobacco settlement that saw some of the country's largest tobacco companies agree to pay $246 billion over the next 25 years to fund public-health initiatives.

Much of that money has since been spent on other things, according to the Campaign for Tobacco-Free Kids, which estimates that states will receive $25.6 billion from the tobacco settlement this year, but only use 1.8 percent of it to combat tobacco use.

If the news that some of the money from the foreclosure settlement won't end up in borrowers' hands is disappointing to some, it won't be the first time this week that the deal has let someone down.

While the settlement involves five of the country's largest banks -- Citigroup, JPMorgan Chase, Ally Financial, Wells Fargo and Bank of America -- and an amount of money that has been called one of the largest mortgage settlements in history, many borrowers stand to realize practical benefits that are marginal at best.

Some 1 million homeowners will receive material mortgage relief that may help them stave off a default, but another 775,000 borrowers who have lost their homes to foreclosure will receive payments of no more than $2,000.

And the settlement excludes mortgages owned by Fannie Mae and Freddie Mac, the massive mortgage agencies currently in government conservatorship, which means about half the country's mortgages aren't covered at all by the deal.

Comments

[thomasskycap]

10:00 AM on 03/16/2012

Why are politicians allowed to steal in broad daylight? I'm a senior citizen who paid into Social Security, the majority of my adult life, feeling secure that I could live my twilight years comfortably with my pension, and my Social Security, the politicians use my Social Security for something that it wasn't intended for, and changed the name to an entitlement, to justify their pilferage. Acquiring political office, is just a license to steal.

[redvelvetflames]

07:48 PM on 03/15/2012

Would pursue legal action against the state for taking the money if I were a victim

[dbailey]

08:16 PM on 02/21/2012

Wrong Jerry Nixon. Just another example of theft and dishonesty by the GOP. They'll steal that money and then try to run for re-election saying they balanced the budget. Scott Walker is not a govenor nor does he represent government. He's a petty thief.

[nchriste]

10:55 PM on 02/15/2012

It ought to be called "Foreclosure victims tax".

[JoshuaRNoble]

06:13 AM on 02/15/2012

As a MO resident, I ask you all to help me send the message to Mo Gov. Nixon and Att. Gen. Koster that 2 wrongs do not make a right- homeowners were wronged by foreclosings, and they're being wronged again by being denied the funds to help them! Just b/c it's going to education, does NOT make it right! And as a MO resident, I can tell you- funding for education shouldn't be cut anyway! PLEASE sign and share the petition! http://www.change.org/petitions/missouri-governor-jay-nixon-missouri-attorney-general-chris-koster-ensure-foreclosure-settlement-funds-help-homowners-and-are-not-diverted

[Jerry Nixon]

09:52 PM on 02/15/2012

So, wait. You're complaining that the government is taking the mortgage settlement money from people to close budget gaps so they can just spend it on more government programs? And you're pretty sure these people need the money and can better decide how to spend it as opposed to a wasteful government?

You do realize you've just become a Republican, don't you?

[A level Head]

09:14 PM on 02/14/2012

Robo Signing -- In this case it is the practice of a bank employee documents without verifying the information contained in the document.

It is against the law --- It should be punished --- Just like any other crime.

HOWEVER -- The act of Robo Signing does not change the underlying circumstance of the foreclosure in many instances.

The fact of the matter is that the Homeowner did not make payments as agreed -- The mortgage was in arrears past the point making foreclosure the normal course of events.

So while the Bank should be punished for breaking the law the situation should not be seen as an opportunity to allow debtors to enrich themselves at the expense of another group -- Namely shareholders of the Banks.

What is being conveniently overlooked is that the majority of these properties are in default -- The default is a separate act. Robo Signing was only made possible because somebody (the debtor) did not live up to their responsibility.

There is something morally repugnant about allowing a bailout of what are essentially people who did not pay for their homes.

So in those cases where a homeowner can be shown to have actually lost something as a direct result of Robo Signing I say great -- Assess civil penalty via the Tort System -- In truth those cases will be a small minority. As for the rest, treat the penalty agreed to in the same manner as any other monetary sanction in a

[AskandThink]

11:41 AM on 02/22/2012

Fanning you because it does indeed seem you have A level Head.
: D

Sadly though Robo Signing is but the tip of the iceberg when it comes to the illegal and unlawful actions from the banks as anyone who has done their due diligence on their property transfer documents through a Forensic Audit knows. Showing the errors of incorrect naming of banks, incorrect accounting, even bizarrely incorrect property descriptions.

MERS (Mortgage Electronic Registration System) is a DISASTER! But hey we all know with computers the old rule always applies…. Garbage In, Garbage Out!

We need to INSIST all land transfers RETURN to LAND COURT! Gives our States revenue AND protects US! When and if the mortgagor has LEGALLY and NOT CRIMINALLY done THEIR job then and only then can we look at the other side of this table IMHO.

[Prankster]

12:18 PM on 02/14/2012

Are you kidding me???? The politicians are taking money from a settlement for homeowners??? WTF? Here's another reason that Walker and the rest of his bagger governors have got to go!!!! They DO NOT work for the American People!

[PROGRESSISGOOD]

09:43 AM on 02/14/2012

That money is the property of the homeowners who were defrauded by the banks. These governors should all be jailed for grand larceny.

[Dosadi]

06:07 PM on 02/13/2012

Where were these states when their citizens fortunes were stolen from them? The banks had the property values lowered so they could steal the equity and these states did nothing. Now they will take money that is being given to them that is supposed to go to the citizens and try to say look we balanced our budgets.  This is so trifling.

[lulubelle1956]

05:28 PM on 02/13/2012

here's hoping these frauds who said they fixed their budgets all on their own by eradicating collective bargaining and firing people are stopped dead in their tracks by the feds.

[Gonzo333]

05:18 PM on 02/13/2012

Joe Public gets screwed again. Class warfare.

[american-dolt]

03:40 PM on 02/13/2012

Occupy Washington, they do nothing for the people.

[Collapsing House Price]

12:52 PM on 02/13/2012

Housing prices are cratering.

Why buy a house today when you can buy later for 65% less?

[OutAtFirst]

04:57 PM on 02/13/2012

At least you don't have to spend a lot of time composing your posts, since it's always the same one.

[Collapsing House Price]

04:57 PM on 02/13/2012

Just countering the site Housing Crime Syndicate lies.

[traceymarie]

09:43 PM on 02/13/2012

this is the second incarnation for that one....it was a bit worse before banning

[Birdman 49]

11:23 AM on 02/13/2012

Just like the states, F the people. If they would stop lowering tax rates on big business, they would have a lot more funds coming into the states, but no, free money is always better and the heck with the people

[Tejascc]

10:41 AM on 02/13/2012

Gramm–Leach–Bliley Act, named after its co-sponsors Phil Gramm (R, Texas), Rep. Jim Leach (R, Iowa), and Rep. Thomas J. Bliley, Jr. (R, Virginia). November 12, 1999.

The repeal of provisions of the Glass–Steagall Act by the Gramm–Leach–Bliley Act in 1999 effectively removed the separation that previously existed between investment banking which issued securities and commercial banks which accepted deposits. The deregulation also removed conflict of interest prohibitions between investment bankers serving as officers of commercial banks. This repeal directly contributed to the severity of the Financial crisis of 2007–2011 by allowing Wall Street investment banking firms to use their depositors' money that was held in the commercial banks.

Looking to blame something or someone. Here is a good start.