Oppenheim Law

How Some States Are Spending Foreclosure Settlement Money Is Far From Settling

Blog post   •   May 19, 2012 18:15 EDT

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. 

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