The biggest banks in the country set in motion the events resulting in the mortgage crisis that would tailspin the nation into an economic depression. Millions of people conned into overpriced and risky mortgages lost their homes to foreclosure. Many also had to file for bankruptcy.
To pay for this, the federal government finagled a collective settlement: $110 billion. The idea was that these large institutions would have to pay recompense to those they affected.
But as The Wall Street Journal recently learned, underwater homeowners didn’t see much of this money, which was divvied up on a state-by-state basis, depending on how greatly each was affected. So how was that money spent?
In New York, the bank settlement money was granted to the annual state fair for a brand new horse barn and stables. The state of Delaware chose to use the money to subsidize local police email accounts. In New Jersey, a former reality television star’s mortgage firm raked in $8.5 million as a whistleblower reward for reporting misconduct by the bank.
It is true that homeowners did see some of those proceeds. Some of it went to aid borrowers with their inflated mortgages. Some went to assist low-income borrowers with loans. Some of it was gifted to community groups and legal aid offices.
But for the most part, the WSJ investigation revealed, much of the money was kept by the federal government, the entity that levied the fine. Of the $110 billion that was collected, about $50 million was pocketed by the U.S. government. Perhaps more troubling is the fact there has been little disclosure of how that money was used.
The newspaper reviewed the terms of some 30 settlements from the six largest banks, as well as combed through public records with dozens of state and federal agencies. Reporters also spoke with homeowners who received payouts as well as those who tried unsuccessfully.
Their accounting revealed the following break-down of where those funds went:
- $49 billion to the Treasury Department. Some went to Fannie Mae and Freddie Mac housing agencies, but exactly how that money was spent isn’t known.
- $45 billion was to go toward “consumer relief.”
- $447 million went to the U.S. Justice Department, which prosecuted the criminal cases that ultimately led to these settlements.
- $5.3 billion went to various states, with no restrictions on how that money could be spent.
- $10 billion was granted to whistleblowers and housing-related federal agencies. Some of the money was reverted back to the U.S. Treasury Department.
For our Miami foreclosure defense lawyers, the problem is as much with the lack of transparency as it is the way the money was spent. The fact that these settlements were brokered on behalf of financially ruined borrowers and that those borrowers in turn received less than half of the proceeds is deeply troubling.
Where is the accountability? There has been little to no assurance from the government that this money has been used to quell the mountain of housing-related issues that persist to this day. In fact, the evidence that’s been uncovered thus far suggests that at least half was not used for that purpose.
If you’re battling debt collection in Miami or the surrounding areas contact Jacobs|Keeley for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday at 5 p.m. on “Debt Warriors with Bruce Jacobs and Court Keeley,” discussing foreclosure topics that matter to YOU.
Big Banks Paid $110 Billion in Mortgage-Related Fines. Where Did the Money Go? March 9, 2016, By Christina Rexrod and Emily Glazer, The Wall Street Journal
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Naked Capitalism: Robo-Signing an Ongoing Plague, March 7, 2016, Miami Foreclosure Attorney Blog