Recently the Obama administration announced a victory against the too big to fail banks which are causing the home foreclosure nightmare.  Basically the banks admitted they screwed up, and agreed to pay a huge settlement to help people (lucky enough to still be in their homes) refinance their loans.

But now it’s been revealed that money going directly to state governments can be used for anything, and some local governments will use that settlement money to tear down vacant homes!

The Huffington Post is also reporting that Cleveland, Ohio, has already spent $60 million tearing down homes repossessed by the too big to fail banks.  And that money came from city social programs meant to help the poor!

“We would have much rather spent that money helping families and creating homes rather than knocking houses down that we believe are owned by some very well resourced banks.”-Chris Warren, Cleveland, Ohio’s chief of Regional Development

Now, Ohio is set to get $335 million from the National Mortgage Settlement, and $75 million will be used to tear down homes, rather than get people back into them!

Ohio is getting a big chunk of the settlement money, while New Hampshire is getting a smaller share.  In an opinion piece out of New Hampshire, the SentinelSource says “…investigations have turned up enough reckless and unprofessional behavior on the part of big mortgage loan servicers to justify their paying penalties and granting relief — and in sums far larger than the settlement calls for.”

One aspect of this “settlement” is that states get a large amount of money that has apparently no strings attached. In other words they can do whatever they want with it.

In the case of Idaho, Attorney General Lawrence Wasden said on top of the money going to help keep Idahoans from losing their homes (and the piddly, and I mean piddly!, amounts of money being paid to people who already lost their homes), the state of Idaho gets more than $13 million!

• Eligible Idaho borrowers will receive an estimated $74,686,493 in benefits from loan modifications and other direct relief.
• Approximately 5,000 Idaho borrowers who lost their home to foreclosure between January 1, 2008, and December 31, 2011, because of substandard servicing practices, will receive $9,998,041 in cash payments averaging $1,500 to $2,000 for each affected borrower. These borrowers have been identified by their servicers and will be contacted by the settlement administrator.
• The settling servicers will pay $15,172,779 to fund a program that allows underwater borrowers to refinance their loans.
• The state will receive $13,932,238.

Notice there’s nothing specific about what the more than $13 million going directly to the government of Idaho is to be used for.

Also, the settlement does nothing to protect homebuyers from MERS (Mortgage Electronic Registry System).  Recently the Attorney General of New York filed suit against the too big to fail banks on the grounds that MERS was causing many of the foreclosures, illegally: “…brought foreclosure proceedings en masse based on deceptive and fraudulent court submissions, seeking to take homes away from people with little regard for basic legal requirements or the rule of law.”-Eric Schneiderman, New York Attorney General

To make matters worse, several states, like Alabama and Virginia, are reporting scams: “The caller requests the consumer’s bank account number and alleges that he will direct deposit settlement money into the consumer’s bank account…  Mortgage borrowers should contact their mortgage servicers directly…”-Kenneth T. Cuccinelli II, Virginia Attorney General

…there before me was a black horse! Its rider was holding a pair of scales in his hand. Then I heard what sounded like a voice among the four living creatures, saying, “A quart of wheat for a day’s wages, and three quarts of barley for a day’s wages, and do not damage the oil and the wine!”