Should States Use Settlement Money for Deficits or Housing? Oh, So What and Who Cares?


I cannot believe how many articles have been written about the various states that have decided to use some or all of the money from the national mortgage settlement to pay down budget deficits and fund other non-housing related programs.  The whole debate is pointless, and those involved obviously just don’t know enough to know that.


Someone named Amanda Sheldon Roberts of Enterprise Community Partners even published a report titled: Understanding How States are Spending their Share of the National Mortgage Settlement.  The New York Times has been all over the issue too, as in, “Needy States Use Housing Aid to Plug Budgets,” and ProPublica, who I think aspires to become “The Foreclosure Channel – All Foreclosures All the Time,” came out with, “Billion Dollar Bait & Switch: State Divert Foreclosure Deals.”


ProPublica even has a whole section of their site called “Foreclosure Crisis – Banks & Government Fail Homeowners… An Ongoing Investigation.”  Well, I do love an investigation.  And Lord, I do hope they learn something.


With all this coverage, you’d think there was actually a settlement… with actual money being paid out… and that someone cared one way or another about this topic.  And that it matters, one way or the other, what the states are doing with the hypothetical settlement money.


You’d think all that, but it wouldn’t make it true.  To me, it’s almost like the flurry of articles that were written about Y2K back in 1999… as in… so what and who cares.


Homeowners, in general, certainly don’t.  Most barely know what the subject is about.  And the ones focused on the foreclosure crisis are about as interested in what’s going on with the settlement as they were about the OCC Independent Foreclosure Review.


I asked a homeowner who follows my blog, “So, what do you think about the states diverting funds from the settlement to cover the state budget deficits?”


She replied, “The settlement is a joke.”  (Not that she was laughing.)


I asked a couple of homeowners who are not part of the foreclosure crisis… yet.  Neither had heard of the national mortgage settlement.  And the one homeowner I spoke with that had heard about the settlement was happy that the money was being diverted.


“I’m glad they’re doing that,” he told me.  “People bought homes they couldn’t afford and now they’re looking for a free ride.”


“Yeah, that’s true,” I said genuinely… as I started pretending to answer my phone.  Then I held up one finger to indicate that I couldn’t continue our conversation at the moment, and walked away to take my pressing and yet imaginary call.


When I saw the very first state make a grab for the settlement cash allegedly headed the state’s way, I laughed and vowed not to let it get to me.  Mandelman Matters, after all, only writes about things that “matter,” and this most assuredly does not.


About a month ago maybe, I saw a story about some group in Arizona I think, fighting the governor or legislature after they had already snatched their ill-gotten booty.


I thought to myself: “Yeah, well… good luck with that, guys.  You go ahead, I think I’ll sit this one out, if you don’t mind.”


To-date, roughly $974 million has been diverted from the foreclosure crisis, which comes out to about 40 percent of the total amount earmarked for the states.  And ProPublica now has an election results type map where you can watch state governments continuing to pilfer funds away from foreclosure victims as additional decisions are made.


I wonder what happens when all the money is gone.  I think it would be cool if the map just went, “POP!” and disappeared.


The groups that are upset over the way things have been going all say that they want to see the money go to assist the victims of foreclosures, but they’re missing the point… it just doesn’t matter.


California, the state with the highest numbers of foreclosures and the largest budget deficits is taking all the money to the state’s general fund.  Florida, another state smothered in foreclosures, hasn’t made final decisions yet, but at this time, the Sunshine State has allocated none of its $334 million and change to homeowners.  And then there’s Georgia, a state desperate to do something about foreclosures, has taken the entire $99,400,000 directly to the state’s coffers.

Ohio is the best… they’re setting aside something like $75 million to tear down homes.  Now that’s compelling television.  Here’s an idea for the state to raise some additional revenue: Find the family that had to be evicted from each home so it could be torn down a year or two later and film their reaction to their home being razed to rubble.


The show could be called: Are You a Worthless Deadbeat, because if you weren’t sure before as to whether our society thought of you as a worthless deadbeat… after they throw you out of your home in order to tear it down… well, you know you’re a worthless debate after that.  I’ll bet people would go Pay-per-View on something like that.


But, the overriding point here is that it doesn’t matter in the least whether the states take the money that was intended for homeowners in foreclosure and use it for whatever other purpose.  Build a sports stadium with the money… that would be nice… maybe the money could buy LA an NFL team… that would be something to consider.  Or just cover the state’s bond payments to JPMorgan or whomever we own bazillions of dollars in interest to… I really don’t care.


In fact, don’t even tell me and I’m even okay with that.  Just pretend like the whole settlement thing didn’t even happen.


I don’t want ProPublica to be upset with me for saying this, because they really did build a fantastic interactive map and all… really cool… just entirely irrelevant.  Maybe they could use it for something else, like tracking the fiscal meltdown of the states as they march towards bankruptcy over the next few years.  Just a thought.


Anyway, all this media coverage of the states taking the money for other purposes is almost funny to me.  Why would it matter what the states do with the money?


It’s not like any of the states have the foggiest idea on what to spend the money in order to help those in foreclosure.  So, what would they have done with it anyway?


Look, I’m not being cynical here… and I’m not being snarky.  I’m just stating the obvious and pointing out the established facts.


Below is a list of the “Hardest Hit States” and the amounts of money they each received from the federal government to fund programs to help mitigate the damage of foreclosures.  And they’ve had this money SINCE EARLY 2010.


Alabama – $162,521,345

Arizona – $267,766,006

California – $1,975,334,096

Florida – $1,057,839,136

Georgia – $339,255,819

Illinois – $445,603,557

Indiana – $221,694,139

Kentucky – $148,901,875

Michigan – $498,605,738

Mississippi – $101,888,323

Nevada – $194,026,240

New Jersey – $300,548,144

North Carolina – $482,781,786

Ohio – $570,395,099

Oregon – $220,042,786

Rhode Island – $79,351,573

South Carolina – $295,431,547

Tennessee – $217,315,593

Washington DC – $20,697,198

 Here’s what it says about the program on the Making Home Affordable website…


Early in 2010, Treasury announced that the Hardest Hit Fund® would provide more than $7.6 billion in aid for homeowners in states hit hardest by the economic crisis. Since then, state housing finance agencies have used the fund to develop programs that stabilize local housing markets and help families avoid foreclosure.


So, let me be the first to say: Bang up job so far guys!  Crackerjack work… absolutely crackerjack.


To give you a couple of examples…


Arizona got $97,800,000 from the national mortgage settlement and they’ve already taken $50 million for the state’s general fund.  And people in are upset about that… I think some group may even being suing over it.


But the State of Arizona has had $267 million to spend on the foreclosure crisis for two and a half years and during that time they’ve done… well, almost nothing.  After the first year of their homeowner assistance program, it had helped literally ONLY ONE HOMEOWNER, but the program’s spokesperson did say there were two or three other homeowners in the process.


So, what possible difference does it make that the state takes the $97 million for the general fund, when the state did essentially nothing after having $267 million for 2.5 years?  The answer is… it doesn’t make any difference at all.


California has had almost $2 billion in Hardest Hit funds and what has the state done with the money to stop foreclosures during that time?  Well, let’s see… um… to be fair it’s something greater than “Diddly Squat,” but quite a bit shy of “Made any Noticeable Difference.”


California’s program was divided into four parts.  The most successful of the four was the one that provided money to defray moving expenses for those losing homes… basically enough money to rent a U-Haul for people who hadn’t made a mortgage payment in two years.  Brilliant stuff, I’m sure you’d agree.

Another California program involved money for unemployed homeowners so they could make mortgage payments for up to six months, if qualified.  Now, I don’t know how many did qualify for the program, but I know it’s not that many because I’ve never heard of anyone who did… and I hear about everything.


But, regardless… this program does nothing to stop foreclosures, it just hands over six months of mortgage payments to the banks.  After the six months ran out, assuming the homeowner still couldn’t find work, or only found work making much less money, then foreclosure would again be in the homeowner’s future.


I could go on and on and on… and on… it’s the same story in every single one of the 19 “hardest hit” states.  So, who cares what the states do with the national mortgage settlement money… they could leave it earmarked for foreclosures, but so what?  They’ve got a whole lot more than that already designated for foreclosures and they’re not doing anything even remotely effective with that.


Oh, I know… those who are upset all say the same thing about how the money should be spent: counseling and legal aid, but that’s just a conditioned response… like a monkey see, monkey do sort of thing.  Both have existed over the last four years and you can see where we are anyway.  (Secretary Geithner, by the way, says that Hardest Hit funds cannot be used to fund legal aid… isn’t that interesting?)


I’m sure the people upset about where the money isn’t going include those that would potentially be recipients of that money.  And I’m not saying that’s necessarily a bad thing, but it does explain something about their motivation.


Don’t get me wrong, by all means fund legal aid… fund counseling services… fund them until the cows come home.  But don’t pretend that doing so is going produce a different result than we have today.


In fact, I think we should all stop all pretending related to the foreclosure crisis.  Frankly, I’m damn tired of it, and those that don’t know any better should be both embarrassed and ashamed.


The president never talks about it… neither does Mitt Romney… neither does any other government official unless there’s some reason to look “concerned.”  The national mortgage settlement is much ado about nothing.  Sure, it will help some, but precious few.  Its biggest contribution has been the positive PR its provided for the administration.


But homeowners are reaching their boiling point.  They’ve had more than enough of the positive PR… the new programs… the “enforcement” that never enforces anything… the lawsuits that only get overturned on appeal.  There are still those holding onto a last shred of hope, but that’s fading fast… it’s much later than you think.


They’re all done playing with interactive map graphics on ProPublica that track how they’re being screwed.  And as to ProPublica’s sure to be award-winning coverage of the foreclosure crisis that’s labeled an “On-going Investigation,” here’s a free tip… the investigation has ended and the jury is in… this is a national tragedy.


But, I understand now that this is not an accidental tragedy, but the preordained outcome of a conscious decision by my government to allow foreclosures to be the vehicle through which American consumers are forced to deleverage… no matter the pain, no matter the loss, no matter the toll on human life or the degree of human suffering.


It’s happening all around us every day… I live at ground zero and I’ll stay here as long as I can screaming my head off and trying to help homeowners survive if I can.


But it’s happening because government wants it to happen, make no mistake about that.  So, let’s stop pretending things like the mortgage settlement matter… I know they don’t and so do you, Mr. President.


I get it… the states are broke and headed for bankruptcy with a several year stopover in austerity.  So, take the money… take the hardest hit money too… take it all.  Raise our taxes while you lower our wages, and just keep telling us we’re recovering.


Just stop pretending… it was adorable when my daughter did it at age four, but when adults do it… well, not so much.


Mandelman out.

Page Rank