Salinas, Calif.-When the California Attorney General negotiated the mortgage settlement with the big 5 banks, the State of California's direct payment in 2012 was 411 million dollars. Where did the money go? If you're a struggling homeowner seeking advocacy with the bank through your loan modification or refinancing of your home, you won't like the answer.
Last month Central Coast News introduced you to Patrick and Bridget White. A couple who felt Chase Bank manhandled them for over 3 years and then finally offered a take it or leave it loan modification that left them paying more than their previous mortgage.
What did the White's desire? "They get their money, we keep our house...that's what we would like."
We were able to connect the Whites with an experienced real estate broker who got them a short sell to an investor and now they're renting their home back from the new owner for less than 50 percent of their former monthly mortgage payment.
But what many housing resource providers tell us and what the Whites really needed when it counted was adequate funding for mortgage counseling that would have provided them the necessary leverage with the banks.
Here's the sad truth for people like the Whites from Clear Point Financial Credit Counseling's Chief Education Officer Martha Lucey. "The funding is not sufficient and for many agencies the funding is coming too late." Or the funding is just not there and will not be there for many agencies to advocate for borrowers with the banks.
The Center For Investigative Action learned the California Department of Justice negotiated a 411 million dollar payment from the banks to the State of California in 2012 for harm done during the housing crisis.
With the Homeowner Bill of Rights signed into law in January, Attorney General Kamala Harris touted, "We're done with false promises." Speaking about the shenanigans from the banks in dealing with distressed borrowers. But what about the millions of homeowners still struggling post housing bust of 2007? Harris put language in the settlement deal with the banks that 411 million dollars would go to housing issues such as fraud investigations, consumer education and counseling for distressed borrowers.
But what we've learned is that money went instead to the state's general fund to pay down debt.
HD Palmer, the Governor's budget spokesperson tells Central Coast News, "The money didn't go to pay off debt of some sort, it went to programs that have an association of housing." Debt by any other name is just debt.
In fact, Governor Brown chose to use a bulk of the money to help the state's bottom line instead of helping the homeowners by funding more mortgage counselors that would help navigate the mine field of loan modifications or refinancing mortgages with the banks.
Over 95 percent, $392 million dollars of the $411 million went to offset general fund debts from 2012 to 2014...some of which was related to housing. Just 18 million dollars actually went to housing counseling and resource providers.
So what of distressed borrowers? Lucey says, "In making so much of the funding go to the general budget deficit, it doesn't end up helping consumers most directly impacted by this crisis."
In speaking the AG's office, while just 18 million dollars goes to housing counseling, their California Monitor Program has helped 2,200 people who have had difficulties in the mortgage process and that the new Homeowner Bill of Rights applies to all banks. Sorry, but that's a drop in the distressed borrower bucket.
The non partisan Legislative Analyst Office surely would see the need to help struggling Californians caught up the housing crisis? Fiscal and Policy Analyst Tor Tarantola tells Central Coast News, "We think as a policy matter, when the legislature has to pass a balanced budget it's better to reduce reductions on programs people traditionally relied upon than to create a new program." Tarantola says given the direct money paid to foreclosed on homeowners, this was acceptable to his office.
So the Governor got a free pass from the LAO's office.
And Palmer says, "The Governor believed that the appropriating of those funds in the manner in which he did, was a proper and good policy going forward."
But the bucks stop with the Legislature and the Legislature agreed with the plan. So in the end, only $18 million of $411 million dollars will aid housing counselors in helping the millions of people impacted by the foreclosure crisis in this state.
We've only heard back from one central coast lawmaker on this. Senator Bill Monning agreed with the Governor's plan for the $411 million dollars saying, "Everyone in California has been impacted by the foreclosure crisis... the money was used to help offset what happened to the state's budget."
So $18 million dollars goes to housing counselors and will be dispersed by the end of March. Too little, too late when you consider the million still trying to dig out of the debt the housing crisis has caused.
