In April, the nation’s five largest banks — Ally/GMAC, Bank of America, Citi, JP Morgan Chase, and Wells Fargo — put to rest allegations of deception and illegal activity during the mortgage crisis by agreeing to a $25 billion deal.
That, unfortunately, is the easy part. More difficult is figuring out exactly where this $25 billion is going.
As ProPublica, the Pulitzer Prize-winning investigative journalism site, pointed out May 22, there’s a lot more in the settlement than meets the eye. The vast majority of this settlement doesn’t arrive in cash. Nearly $20 billion of it will come in the form of credits that cut debt, facilitate refinancing, and deliver homeowner relief to the thousands of American families affected by the mortgage crisis.
The $5 billion actually being paid out in cash causes even more confusion. $1.5 billion will be sent to homeowners who lost their homes. An additional $912 million is slated to be sent to the federal government. $90 million will be sent to various state organizations. Most strikingly, $2.5 billion remaining after these deductions will be distributed between each state who filed a claim (every state minus Oklahoma).
Following the money, ProPublica conducted a survey to see where the $2.5 billion was slated to end up. Their data, available in an detailed interactive map, paints a picture as diverse and bifurcated as these United States. Some, like Colorado, are using the entire sum to provide aid to homeowners. Others, like Nevada, are diverting the entire sum into their state’s general fund.
Using that data, SmartPlanet put together a list of the five states who are taking in the largest slices of the $2.5 billion-dollar banking pie. Here’s what they’re up to:
The Land of Lincoln had an average delinquency rate of 9.87 percent, slightly above the Jan. 2010 national peak of 8.2 percent. For its trouble, the state will be taking in $105.8 million. Of this, $20 million will be used as aid to homeowners. The purpose of the remaining $85.8 million has yet to be determined.
4. New York
Though the average delinquency rate for New York State during the financial crisis came in at 8.03 percent, just below the national average of 8.2 percent, the state still shouldered a tremendous proportion of national mortgage delinquencies. For this, New York will be receiving $107.6 million settlement. Of this, $15 million has been reserved for aid to homeowners. The use of the remaining $92.6 million is yet to be determined.
Texas may be home to the lowest unemployment rate in the country, but it ranks high in national mortgage default as well. Though it’s 5.02 percent delinquency rate is far lower than the national average, the state’s size helped propel it near the top of the national list. For their trouble Texas will be receiving $134.6 million. Every penny is slated to be added to the state’s general fund.
Part of the Sun Belt, Florida had more more mortgage delinquencies than any other state in the country. A stunning 17.88 percent of mortgages defaulted during the crisis of 2008: more than twice the national average. For this, the state will be receiving a $334.1 million settlement. $33.4 million of this has already been designated to the state’s general fund. The use of the remaining $300.7 million has yet to be determined.
At 9.41 percent, California’s delinquency rate wasn’t far above the national average. However, for many California residents, the mortgage crisis was catastrophic. (For greater insight, check out photographer Bruce Gilden’s Oct. 2010 dispatch from Fresno). As a result, the state is being awarded $410.6 million: more than any other state in the country. California’s governor Jerry Brown is using the entire sum to help alleviate the state’s budget gap.
Images: Bob Segal/Flickr, DoctorWho/Flickr, Ed Schipul/Flickr, Doug Kerr/Flickr, and Benson Kua/Flickr