Published on June 2nd, 2012 | by RLn Staff0
Public Interest Journalists Expose Mortgage Settlement Bait and Switch
On May 22, Propublica published a story highlighting how states are spending the $26 billion the states won as a result of negotiations between the nation’s state attorney generals and the nation’s biggest banks to forestall the massive number of lawsuits were facing as result of bank malfeasance leading millions of foreclosures and the financial crisis that plummeted the nation into a deep recession.
In California, the diversion of the settlement money received scant notice with the release of Gov. Jerry Brown’s revised budget and the shock of the greater than expected growth of the state’s budget deficit to $15.7 billion. In the revised budget, Brown proposed to use the money to help fill the budget gap. Attorney General Kamala Harris, who was on the last hold outs in the settlement negotiations and ultimately secured over $400 million for the states foreclosed homeowners, protested the move.
Propublica conducted an investigation into how other states were using their settlement cash and found that all of the states as a whole, have diverted $974 million from the mortgage settlement agreement to pay down budget deficits or fund programs unrelated to the foreclosure crisis. That’s nearly forty percent of the $2.5 billion in penalties paid to the states under the agreement.
Propublica took note of one part of the settlement as it related to the cash going to the states; the deal urged states to use that money on programs related to the crisis, but it didn’t require them to.
ProPublica contacted every state that participated in the agreement (and the District of Columbia) to obtain the most comprehensive breakdown yet of how they’ll be spending the funds. You can see the detailed state-by-state results here, along with an interactive map.