SACRAMENTO, Calif. – A new analysis shows California is taking in approximately 41% of the approximately $20-billion that the five biggest mortgage servicers agreed in February to provide to homeowners in 49 states, in order to settle claims related to alleged abuses of consumers.
That amount is billions of dollars more than an analysis of nationwide mortgage data suggests is fair, according to American Banker, an affiliate of Credit Union Journal. In addition, California’s hefty share of the proceeds may have come at the expense of other deserving states.
One of the have-not states is Ohio, where Rust Belt housing woes have been overshadowed by the larger real estate problems of the Sun Belt. Ohioans, who make up 3.7% of the U.S. population and have suffered 3.2% of the nation’s foreclosure starts, have received less than 1% of the consumer relief dollars under the multistate settlement.
“I certainly think it is problematic,” David Rothstein, who studies the foreclosure crisis for Policy Matters Ohio, a left-leaning policy research organization, told American Banker. “I don’t think that people really anticipated that certain states would have that much larger a percentage of homeowners being helped.”
California’s windfall is a by-product of a side deal that the state’s attorney general, Kamala Harris, cut with Bank of America, JPMorgan Chase and Wells Fargo, using her leverage as the top prosecutor in the nation’s largest state to extract as much money as possible. The state also won tough provisions to enforce and monitor the deal, giving its homeowners another leg up over other Americans who are also seeking funds.
Michael Troncoso, senior counsel to Attorney General Harris, argued that California deserves a large share of the pie because it was “one of the hardest hit states in the country by any metric.”
Similar to others who helped negotiate the nationwide settlement, Troncoso also believes the total settlement amount would have been smaller for all states if California had not signed on to the agreement.