by Brian Mahany
Waiting for your slice of the $25 billion mortgage foreclosure settlement monies? You might be waiting for a long time. Like forever. While I realize the term “steal” as used in this title is a pretty serious accusation, even HUD is upset at what many states have done with the settlement funds. To understand the full impact of what has happened, a brief history is helpful.
Earlier this year, Bank of America, Ally Financial, Wells Fargo, Citibank and Chase agreed to settle charges of foreclosure abuses. Under the terms of the agreement, the big 5 lenders agreed to pay up to $25 billion to assist struggling homeowners and those who already lost their homes. Some of that money – $2.5 billion – was given directly to states to fund state foreclosure prevention efforts. Unfortunately, many states are simply taking the money and spending it in their general fund budgets. In other words, no lifeline to distressed homeowners.
Back in February, Arizona Attorney General Tom Horne was hitting the airways extolling the virtues of the settlement and touting how the money would be spent on homeowner relief efforts. Shortly thereafter, Horne was being sued by consumer advocates for not honoring the settlement terms.
What happened? The Arizona legislature decided to divert almost $100 million for other government purposes.
Normally HUD is careful not to criticize state governments for how they spend money but according to a Wall Street Journal report, HUD Secretary Shaun Donovan has urged states not to divert the settlement monies from housing.
As corrupt (and perhaps criminal) as Big Banks acted both before and after the housing meltdown, state governments are proving themselves to be just as guilty. The Wall Street banks flaunt HUD regulations and engage in outrageous foreclosure behavior. When they are finally caught and brought to justice, they quickly settle and offer to cough up billions to make the problem disappear. Only the problem continues virtually unabated and much of the money paid by the banks to help homeowners was instead diverted from its intended purpose and spent elsewhere.
Big Brother is often as greedy as Big Banks. Unfortunately, the sole remaining remedy for homeowners may just be the court system. Litigation is usually not a practical way to resolve problems. It can be expensive, complicated, nerve wracking and stressful. Most struggling homeowners simply don’t have the money to fight foreclosure cases (if they had the money, they wouldn’t be in foreclosure).
Banks count on homeowners giving up. Fighting a foreclosure is usually an uphill battle and often only winds up in a standoff. The bank can’t prove ownership of the note and the homeowner doesn’t have clean title and thus can’t sell. A new breed of lawyers are entering the fray and suing the banks instead of simply defending foreclosure cases. By suing the bank, homeowners in most states have the right to a jury trial; something banks deeply fear.
Obviously, not every bank has behaved so badly that it can be sued. But the big lenders truly do seem to be “too big to care” and need a wake-up call.
The fraud lawyers at Mahany & Ertl have helped many homeowners. We are not a traditional foreclosure defense firm. Instead, we are lender liability fraud lawyers that sue banks for predatory lending, bank fraud, wrongful HAMP modification denials and abusive foreclosure practices.
Mahany & Ertl – Giving Homeowners A Voice. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine and Minneapolis, Minnesota. Services available in many states.