Gray Rohrer, 03/27/2013 – 03:10 PM
Members of the Senate Appropriations Subcommittee on Transportation and Economic Development unveiled their plan to spend $200 million from a multi-state foreclosure fraud settlement on Wednesday, revealing a significant departure for the House.
The Senate wants to use $70 million for the State Housing Initiatives Partnership program, which provides grants to local governments to pay for affordable housing and its refurbishment and maintenance. The House’s plan does not include any money for SHIP, which also helps low-income households purchase existing homes and provides housing counseling.
The Senate’s SHIP plan would be tailored to special needs applicants, with 20 percent of the money going to aid disabled people. The upper chamber also gives $65 million to the State Apartment Incentive Loan program, with 15 percent of those funds going to units designed for disabled residents. The House provides $50 million to SAIL, with half going to reduced rents and low interest loans for low income residents and the other half going to qualified elderly applicants.
The House plan would give $45 million to the Florida Housing Finance Corp. (which administers the SHIP and SAIL programs) for down payment assistance for teachers, assistant state attorneys and public defenders, veterans and military service members and medical professionals. The Senate does not include down payment assistance in its plan.
Both chambers want to spend part of the settlement money to reduce the foreclosure backlog in Florida, where it takes more than 800 days for the average foreclosure to make it through the court system. The Senate gives $25 million over two years to the State Court System to pay for retired judges to help rip through backlogged cases. The House gives $13 million for one year. Clerks of the court would receive $15 million over two years in the Senate proposal, $6.7 million for one year from the House.
Legal aid programs providing counseling to homeowners in foreclosure or at risk of foreclosure would get $10 million from the Senate, $5 million from the House.
The House also gives $35 million to the nonprofit Habitat for Humanity to construct new homes and rehabilitate existing homes for low income families and provides $20 million to theDepartment of Children and Families to increase capacity and expand services for domestic violence centers and emergency shelters. The Florida Prepaid Foundation gets $15 million in the House plan to add a two-year dorm option to prepaid tuition plans. None of those provisions are included in the Senate plan.
The settlement money is part of a $25 billion multi-state settlement with five of the nation’s largest banks – JP Morgan, Bank of America, Wells Fargo, Citigroup and Ally Financial – for suspicious foreclosure practices after reports surfaced in October 2010 of law firms churning out fraudulent or shoddy documents proving ownership of a mortgage.
Florida’s take in the settlement was $8.4 billion, $7.6 billion of which went to loan modifications, principal reductions or loss reductions from short sales. The rest went to relief for homeowners with underwater loans — those owing more on their home than it is worth — direct payments to those who lost their home in defective foreclosure cases. The state received a $334 million in a direct payment, $74 million of which went to general revenue as a civil penalty and $60 million of which has already been disbursed by lawmakers for FHFC services, legal aid and additional court resources.
The remaining $200 million is to be appropriated by lawmakers this year. Attorney General Pam Bondi, who was part of settlement negotiations, wrangled with legislative leaders last year over how to spend the money. In a statement, she said she will continue to work with both chambers.
“I thank the Senate Subcommittee for their hard work on this good legislation, and I look forward to working with the House and Senate on a final product that uses the mortgage settlement funds to help Florida’s homeowners and to ameliorate the foreclosure crisis in our state,” Bondi said.
The House plan is filed as HB 7111, but hasn’t received committee references, and the Senate version is a proposed committee bill that has yet to be filed.
|Foreclosure Settlement Money Plans|
|Down payment assistance||$45 million||–|
|SHIP program||–||$70 million|
|SAIL program||$50 million||$65 million|
|Florida Prepaid Foundation dorm plan||$15 million||–|
|Homeless housing program||–||$10 million|
|Legal aid||$5 million||$10 million|
|State Court System (total)||$18.3 million||*$25 million|
|Clerks of Court||$6.7 million||*$15 million|
|Domestic violence program expansion||$20 million||–|
|Habitat for Humanity||$35 million||–|
|Administrative costs||$3 million||$3 million|
|Attorney General marketing campaign||$2 million||$2 million|
|Total||$200 million||$200 million|
|*Money would be disbursed over two years|
Reporter Gray Rohrer can be reached at firstname.lastname@example.org.
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WallStreetOnParade.com is a public interest web site operated by Russ and Pam Martens to help the investing public better understand systemic corruption on Wall Street. Ms. Martens is a former Wall Street veteran with a background in journalism. Mr. Martens’ career spanned four decades in printing and publishing management.
By Pam Martens: January 3, 2013
In April 2011, the Office of the Comptroller of the Currency (OCC), the top regulator of national banks in the U.S., signed consent orders with 14 of the largest banks and mortgage servicers requiring that they hire “independent” consultants to review 2009 and 2010 foreclosure actions to determine financial injury to borrowers and provide financial compensation for that injury.
Borrowers that suffered injuries were to receive financial awards up to a maximum of $125,000 under these consent orders. Now, out of the blue, major business media are reporting that this legally adopted plan has been scrapped and a quick fix will soon be announced to fine the whole lot of banks a cumulative $10 billion and call it quits on the investigation.
The first detail you need to know by way of background is that during the relevant foreclosure period of 2009 and 2010, a former bank lobbyist, John Dugan, sat at the helm of the OCC. Dugan has now returned to his former law firm, Covington & Burling LLP, to head its Financial Institutions Group, providing legal counsel to the same banks he previously supervised.
The second detail you need to know is that Dugan’s former law partners at Covington & Burling LLP, Eric Holder and Lanny Breuer, hold the top spots at the U.S. Department of Justice; Holder as U.S. Attorney General and Breuer as head of the Criminal Division.
The speciousness of the original OCC plan has been challenged by the General Accountability Office, ProPublica, and a host of consumer advocates. The GAO found that the letters sent to borrowers who may have been wronged in the foreclosure process were written over their heads and failed to mention any specific dollar amounts they might be entitled to – thus removing the incentive to wade through the legalese. ProPublica found that in at least one case, that of Bank of America, “supposedly independent, third-party reviewers would sit at a computer, analyzing each homeowner’s case by going through hundreds of questions, such as whether the bank had properly reviewed a homeowner for a modification or had charged bogus fees. But the reviewers weren’t starting from a blank slate. Bank of America employees had already supplied the answers, which the reviewers would have to override if they did not agree.”
But the smoking gun in the fiasco is the Engagement Letter Citigroup signed with the mega accounting firm, PricewaterhouseCoopers, LLP (PWC), when it hired it as its “independent” consultant under the terms of the OCC consent order.
Disclosed in the agreement were the following:
PWC, the so-called “independent” consultant, was already on Citigroup’s payroll working on another engagement matter;
Citigroup would have the sole responsibility for identifying the foreclosures for which a mailing would be issued;
Citigroup would have the sole responsibility for hiring a vendor to conduct the mailing to potentially defrauded borrowers – the mailing was not sent out by the OCC;
Citigroup, not PWC, would initially receive the complaint forms from potentially defrauded borrowers;
It would be the “responsibility of Citibank to prepare the case file and conduct the initial review of the complaint. Citibank will then forward the in-scope complaints, a report of Citibank’s findings and its proposed resolution to PwC for independent review.”
And then there was this mind-numbing sentence: “Any direct communication with the borrower will be conducted by Citibank or its Complaint Intake Vendor.” The Complaint Intake Vendor was the entity hired and overseen by Citigroup to conduct the mailing based on the information provided to it by Citigroup. PWC, the party responsible for identifying injured or defrauded borrowers, would not be allowed to speak directly to any of those injured individuals. All communications would be filtered through Citigroup or a vendor hired by Citigroup.
Thomas Curry, the new head of the OCC who was sworn in on April 9, 2012, has a kindly face and sincere manner in his testimony before Congress. But the test of his worth as a banking regulator will be in the small print of the settlement he fashions in this matter. I’ll be watching closely.
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