Three years ago, Texas homeowners facing foreclosure were given a glimmer
of hope in the form of a $25 billion national settlement from five lenders
who were accused of wrongfully forcing people out of their homes: Citi,
Bank of America, JP Morgan Chase, Wells Fargo, and Ally. This money was
earmarked to provide relief for Texas citizens, but so far, none has been
spent to help struggling homeowners.
These five lenders, as part of their agreement, set aside funds with the
purpose of making it less difficult for people to obtain loan modifications
and other assistance. A huge chunk of this money ($124 million, to be
exact) was, however, paid directly to the state of Texas. What happened
to this money? An investigation by WFAA revealed that thousands of struggling
homeowners who have lost or are in the process of losing their homes in
needless and preventable foreclosures have not received a penny of it.
Instead, Texas Attorney General Greg Abbott directed the money into the
state’s general fund.
While lawyers for the Texas AG’s office contend that this was the
only course of action for what to do with the money, many lawmakers believe
this was action was a wrongful diversion of the settlement money and that
it was squandered for purposes other than addressing the foreclosure crisis.
Lawmakers have been threatened with litigation similar to what happened
in California, where a similar misappropriation of funds took place. In
July, a judge ruled that the state improperly diverted money to prop up
state funds and was ordered to return $331 million to a special housing
fund. If this is any indication, Texas may soon face similar action.
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