It’s been six months since the federal government and attorneys general from 49 states came to terms with the five largest lenders in the nation, settling on a $25 billion penalty for illegal foreclosure practices including the so-called “robo-signing” of foreclosure documentation starting back in 2008.
And just as you would expect from both government and corporate America, no matter what they agreed to do, implementation of any plan of action takes time and has miscues along the way. This plan is no different.
Not only did they agree to put a permanent halt to robo-signing practices, the banks also agreed to establishing one point of contact for borrowers to work with along the process, and to stop the practice of dual tracking — continuing with the foreclosure process on a property while at the same time negotiating (supposedly in good faith) with the homeowner for a loan modification.
Then there’s the monetary aspect of the settlement meant to compensate homeowners who were wrongfully foreclosed on by the lenders. Each state gets a proportionate share depending on its size and how hard hit it was by the foreclosure crisis. The federal government took a cut of the action as well.
The problem, as reported by numerous news outlets, is that the national foreclosure settlement is very much unsettled so far. Some states have gone so far as to divert the funds to other uses — namely to shore up state budget shortfalls, or going to programs not addressing homeowner issues.
In Missouri, for example, almost all of its $39 million went to public education, according to a story in The Final Call. Virginia put all of its $66.5 million windfall from the settlement into its general fund with no restrictions attached. Wisconsin is also ready to put the bulk of its funds (about $26 million) into the state general fund. Texas, on the other hand, has received its $135 million in settlement money which — as of June 2012 — was sitting in the state capitol of Austin waiting for the state Legislature to convene in 2013 at which time it will decide whether the funds will go to homeowners or be redirected to some other use.
California as well is looking at taking at least a portion of its funds and redirecting them into other budget purposes, not making Attorney General Kamala Harris, who was a key figure in getting the five lenders to agree to the national settlement, very happy.
According to a recent story in The Republic, housing advocates in Florida are waiting for Attorney General Pam Bondi to release the funds to deserving homeowners who suffered due to the crisis. The story goes on to note that Bondi is in effect being undermined by some state lawmakers who insist that the funds must first be appropriated to the Legislature before it can be disbursed to needy homeowners.
Should anyone be surprised by all this positioning that’s going on? With many states running deficit budgets in a lackluster national economy, is it any wonder that they are seeing this as found money that they are free to do with as they please?
We’d like to know how you feel about this. All comments are welcome.
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