Monday, June 15, 2015

California Ordered to Repay $331 Million - Is Virginia Next?

Today, $350 million worth of chickens came home to roost in California.  Virginia might be next and here's why. 

In the aftermath of the 2008 mortgage-driven financial crash, federal, state and local government budgets were walloped.  One of the jurisdictions hardest hit with foreclosures was Prince William County.  Property values plunged.  Vacant houses were everywhere as people dumped houses that they could never afford with adjustable rate mortgages coming due for readjustment purchased with "no doc" loans.

In 2011, Attorneys General across the United States reached a $25 billion settlement with five major banks regarding illegal and abusive mortgage lending practices.  Virginia's share of the settlement was over $66 million and was directed to Attorney General Ken Cuccinelli to disburse.  As part of a floor debate, I made the card on the right.   

Here's what the court's order said Virginia could do with the money:
Each State Attorney General shall designate the uses of the funds set forth in the attached Exhibit B-1.  
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 and to compensate the States for costs resulting from the alleged unlawful conduct of the Defendants.  
Such permissible purposes for allocation of the funds include, but are not limited to, supplementing the amounts paid to state homeowners under the Borrower Payment Fund, funding for housing counselors, state and local foreclosure assistance hotlines, state and local foreclosure mediation programs, legal assistance, housing remediation and anti-blight projects, funding for training and staffing of financial fraud or consumer protection enforcement efforts, and civil penalties 
Accordingly, each Attorney General has set forth general instructions for the funds in the attached Exhibit B-2.
What did Virginia do in the 2012 Session? 

The Attorney General left it to the legislature, and it was scheduled to be dumped into the General Fund. 

After I gave the speech to the right, the Budget Conferees agreed to put about 10% of Virginia's proceeds or $7 million of these funds into the Virginia Housing Trust Fund.  The balance, $59 million, went into the General Fund. 

I wrote about it here:

Other states did the same thing - simply used the "found" money to plug gaping revenue holes left from the recession instead of helping victims of the largest bank-generated financial crisis since the Great Depression. 

One was California has the largest share and put theirs into their General Fund - just like Virginia.  Today, a judge ordered the State of California to return $350 million to California's housing assistance fund

he General Assembly with the Governor's acquiescence willfully violated the court order.  I would not be surprised if another judge orders Virginia to pay their money back as well. 

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