Foreclosure settlement funds misspent?

by Justin da Rosa16 Nov 2015
Texans who lost their homes during the financial crisis expected some much-needed help from the government, following a $25 billion national settlement with five lenders accused of wrongly foreclosing homes. None, however, saw the benefits of that massive settlement, according to an investigation by a local news outlet.

The five lenders – Bank of America, Citi, JPMorgan Chase, Wells Fargo, and Ally – set aside funds to provide assistance to affected homeowners. They also allotted $124 million to Texas.

An investigation by ABC affiliate WFAA revealed none of those funds went to their intended recipients – homeowners who fell prey to robo-signing and other unethical lending practices.

Of all state payouts, Texas received the third-highest settlement. The settlement documents described how the funds should be used:

"To the extent practicable, such funds shall be used for purposes intended 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 …"

However, there have been thousands of Texans who have lost their homes – or are soon to lose their homes -- through foreclosure.

Instead of using those funds to help these owners, then Texas Attorney General Greg Abbott placed the money in the state’s general fund, according to WFAA.

Jim Daross, a lawyer in the attorney general’s office at the time, told WFAA state law stipulated that was the only thing that could be done with the money.

"Because the AG's office was directed by a state statute as to how to deposit the funds, it was therefore 'impracticable' for it to do anything other than pay the funds over to the general fund," said Daross, who now works in the private sector. "In reality, I believe it would have been illegal to do anything other than that."

However, state Rep. Yvonne Davis, a Democrat, sponsored a bill this year that would make those funds available to homeowners.

"It made no sense then for the state to take all the money and not provide programs, resources, things to make a difference in people's lives," Davis said, according to WFAA. "That money was supposed to help them where they've been wronged."

That bill passed in May.

And now there is lawsuit pending accusing the state of illegally diverting the funds.

"This money was earmarked – it's in settlement documents in a federal district court," Richard Roman, former district judge, and current attorney for one of the homeowners, told WFAA. "That settlement designates where the money is supposed to go to. When it got to Texas, it went somewhere else."


  • by | 11/16/2015 12:35:37 PM

    Strange how it always winds up in the pockets of bureaucrats!

  • by Terry | 11/16/2015 12:49:13 PM

    Why has it taken more than three years for you to realize that Texas, along with 7 other states, put the money into the general fund? While I agree that people "could" have used the funds, we have to take a look at the state laws or regulations to see how the funds need to be disbursed. You should have taken action in May 2012 when there could have been legislation to correct the situation. But let us understand that the funds benefited the "general population" and not a select group of people.

    Stop beating a dead horse.

  • by Julie | 11/17/2015 12:28:41 AM

    Sounds familiar... wa state may be involved in a similar plight. Even though i gave them my case of robo-signing signed docs and fraudulent mortgage mods and assignments made to an invalid beneficiary. They used it to make their deal with the 5 major banks. Dont you all know we and other homeowners are just mere
    squatters and over glorified renters deadbeats.
    Even though we've paid a couple hundred
    grand. Forget that. That doesn't count.
    It's a disgrace and the banks legal representation should all be ashamed of themselves because if we know what we know they know that much as well and that's enough to prove their full of shit. They have no conscience and they make up Microsoft excel.spreadsheets pretending to show a mortgage linked to a trust. This is something my 6th grader could prepare no problem. I don't like their attitude that they are the sophisticated and we are dummies. Total B. S.


Should CFPB have more supervision over credit agencies?