Helen Bailey, the 78 year-old former civil rights activist who was threatened with foreclosure by J.P Morgan Chase while the company trumpeted its efforts to uphold Martin Luther King Jr.’s legacy, will be able to remain in her home until she passes away after a successful campaign by Occupy Nashville:

“I feel like a weight has been lifted off my shoulders,” Bailey said. “I love my home and my community and I am so blessed to be able to stay here. I am thankful for the support of my neighbors and the nation.”

The terms of the agreement from her mortgage-holder, JPMorgan Chase, are sealed, but previous settlement attempts involved a reverse mortgage that would let the new lender sell her home when she dies.

Occupy Nashville took up Bailey’s cause last month and received national attention for their efforts. Bailey was seeking to refinance her mortgage with JP Morgan Chase which would have allowed her to remain in her home for free until she dies, but the bank initially refused.

A petition at Change.org collected over 80,000 signatures, and prominent civil rights activists like Cornel West and Gary Flowers, the Executive Director of the Black Leadership Forum voiced their support for Bailey as well.

Last week, Wisconsin Gov. Scott Walker (R) announced that he would use the funds his state received from a $26 billion mortgage settlement between 49 states and the nation’s largest banks to help balance the state’s budget, even though the settlement money was marked to help homeowners. In all, Walker will use $25.6 million of the $31.6 million Wisconsin’s state government receives to help close a budget shortfall.

Though Walker’s move to push struggling homeowners aside may seem radical, it is now being followed by at least one other state. Missouri Gov. Jay Nixon (D) and Attorney General Chris Koster (D) have pledged to put $40 million of the state’s $196 million share of the settlement into the state’s general fund to boost its higher education budget, Stateline reports:

Koster, a Democrat, told reporters on Thursday that he agrees with the governor’s call for more higher education funding and will transfer the $40 million Nixon has requested into the general fund, citing the “severe budget shortages” the state faces.

Though specific terms of the settlement have not been released, states have been given significant leeway on how to spend the money from it. According to the National Mortgage Settlement website, however, the money is supposed to “help fund consumer protection and state foreclosure protection efforts.” The full $26 billion, though, is already woefully short of what is needed to ameliorate the nation’s housing crisis, and diverting funds from it to other problems will only exacerbate that fact.

And while Nixon and Koster’s plan to boost higher education funding, which faces a 12.5 percent cut in Nixon’s proposed budget, is certainly a noble goal, there are other sources from which the money could come that wouldn’t jeopardize relief from homeowners. As the St. Louis Post-Dispatch pointed out in January, Missouri has a “propensity to hand out tax credits like legislative candy along a parade route.” Ending the credits, many of which go to corporations, could generate more than $500 million in new revenue, more than enough to restore the higher education budget without taking money from programs meant to help struggling homeowners.

Our guest blogger is David Min, Associate Director for Financial Markets Policy at the Center for American Progress Action Fund.

Critics of the mortgage settlement negotiated between the state attorneys general and five of the nation’s biggest banks have claimed that the $25 billion settlement is merely a drop in the bucket compared to the size of the overall housing market problems. But is this a fair characterization?

The settlement will help over a million households, and provide $25 billion in relief to struggling homeowners, including an average of more than $20,000 in principal reduction for approximately one million homeowners. This appears to be a relatively small number of homeowners being helped when compared with the 11 million households that are currently “underwater,” owing a total of $699 billion more on their mortgages than their homes are worth.

But this simple comparison ignores the fact that this settlement is limited to mortgages that were originated for private label securitization. According to the Federal Housing Finance Agency, approximately 35 percent of the nine million loans originated for Wall Street securitization are currently underwater, with an average negative equity balance of about $50,000.

In other words, one in three underwater homeowners with a mortgage originated for Wall Street securitization is going to receive loan forgiveness equal to nearly half of their negative equity.

Critics are also ignoring the fact that the settlement is narrowly tailored to claims around robo-signing and other foreclosure process violations, claims which have very uncertain litigation value and would have taken a long time to resolve. Under the terms of this deal, state and federal prosecutors are free to pursue all other mortgage fraud claims, of which there are many. As the banks themselves understand, they are still subject to an enormous amount of potential liability around their past and present wrongdoings.

When we take these items into consideration, yesterday’s settlement seems like a lot bigger deal than most of the critics are willing to acknowledge. Certainly, the state AG settlement is not a solution to the problems of the housing market, but it is clearly a good and important step towards rectifying the problems of the housing market and holding accountable those responsible.

Yesterday, 49 states joined the federal government in announcing a $26 billion settlement with five of the nation’s biggest banks over the banks’ foreclosure fraud abuses. The money from the settlement is meant to aid homeowners who lost their homes to foreclosure or who find themselves underwater, meaning they owe more on their mortgage than their home is currently worth.

However, Wisconsin Gov. Scott Walker (R) — whose high profile assault on workers’ rights has prompted a recall effort against him — isn’t planning to use the money to help homeowners. Under the terms of the settlement, Wisconsin is set to receive $140 million, $31.6 million of which comes directly to the state government. And Walker is planning to use $25.6 million of that money to help balance his state’s budget:

Of a $31.6 million payment coming directly to the state government, most of that money – $25.6 million – will go to help close a budget shortfall revealed in newly released state projections. [Wisconsin Attorney General J.B. Van Hollen], whose office said he has the legal authority over the money, made the decision in consultation with Walker.

“Just like communities and individuals have been affected, the foreclosure crisis has had an effect on the state of Wisconsin, in terms of unemployment. … This will offset that damage done to the state of Wisconsin,” Walker said.

A memo from Wisconsin’s Legislative Fiscal Bureau released yesterday notes “it is anticipated that Wisconsin will receive $31.6 million. Based on discussions between the Attorney General and the administration, of the amounts received by the state, $25.6 million will be deposited to the general fund as GPR-Earned in 2011-12, and the remaining $6 million will be retained by the Department of Justice to be allocated at a later date.”

Milwaukee Mayor Tom Barrett (D) criticized Walker’s move, saying “not one dime [of the settlement] should be used to fund the unbalanced state budget.” Adding insult to injury, Walker has previously criticized using one-time settlement money to fill budget holes.

The settlement money already doesn’t come close to addressing the depths of the nation’s housing problem, though it will provide real relief to the people whom it does reach. But the money was certainly not intended to paper over state budget problems, particularly in a state whose governor assured everybody up and down that busting his state’s public unions was the key to fiscal solvency. (HT: Jessica Arp)

Today, 49 states joined the federal government in finalizing a $26 billion settlement with five of the nation’s biggest banks over the banks’ foreclosure fraud abuses. The money will be used to aid homeowners, both through direct payments and by reducing mortgage principal for homeowners who find themselves owing more on their mortgage than their home is currently worth.

In terms of the size of the housing problem, as Reuters’ Agnes T. Crane and Daniel Indiviglio noted, $26 billion is a “mathematical drop in the bucket,” considering that homeowners are underwater by some $700 billion. As far as being a knock for the banks, Nasdaq.com columnist Daniel Pereira noted that the $26 billion is about half what the four publicly traded banks involved in the settlement made in profits last year:

The $26 billion represents a significant settlement, but it clearly won’t stagger the banks too much. Together, the four banks mentioned above took in a total profit of $47.6 billion in 2011. It’s not as if the banks will be paying the settlements out of pure profits, either; they’ve all set aside a fair amount of capital to pay for their mistakes. Still it’s telling that the banks will be paying just about half of their annual profits to walk away from the foreclosure mess.

Several state attorneys general were hesitant to join the settlement, fearing that the terms were too easy on the banks and that the extent of the banks’ fraudulent activities had not been uncovered. As we noted before, the settlement protects the banks from state and federal lawsuits pertaining to some abuses, such as “robo-signing” foreclosure documents, but doesn’t prevent individuals from moving forward with their own individual actions against the banks.

While it certainly won’t be a panacea for all that ails the housing market, it will certainly help those people who, until this point, had little hope of receiving a principal reduction any other way.

Federal and state officials today will finally announce that they’ve reached a settlement with the nation’s biggest banks over the banks’ various foreclosure fraud abuses, such as “robo-signing” foreclosure documents and submitting falsely notarized documents to courts. The settlement has been in the works for several months, as a few key states — most notably California and New York — were holding out for tougher terms against the banks.

Here are some of the key numbers in the settlement, which is being officially announced at 10 a.m.:

49: States that have reportedly signed onto the settlement. The lone holdout is Oklahoma, as Attorney General Scott Pruitt (R) feels that the terms are too hard on the banks. Attorneys General Eric Schneidermann (D-NY), Kamala Harris (D-CA), and Beau Biden (D-DE) have thrown their support to the agreement, after opposing earlier versions for being too easy on the banks.

5: Banks covered by the settlement: Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial.

$26 billion: The amount of the settlement. About $5 billion will be direct cash penalties, $1.5 billion of which will go directly to homeowners foreclosed upon between September 2008 and December 2011.

$17 billion: The amount of settlement money going toward reducing loan principal (the amount homeowners have outstanding on their mortgages) and mortgage modifications. Banks will not get dollar-for-dollar credit for every principal reduction, so HUD Secretary Shaun Donovan believes the deal will ultimately result in $30-$40 billion in real principal reduction.

$1,800 to $2,000: The amount going to homeowners who qualify for direct cash payments.

1 to 2 million: Homeowners expected to be aided by the settlement money, with one million receiving reduced loan balances or loan modifications and 750,000 receiving direct payments.

4 million: Americans who have been foreclosed upon since 2007.

The deal protects banks from state and federal lawsuits pertaining to some foreclosure fraud abuses, including robo-signing. However, Schneidermann’s lawsuit against three big banks for allegedly fraudulent use of a mortgage database will go forward. In addition, “individual homeowners retain private rights of action to sue over foreclosure fraud and other abuses.”

Yesterday, the Department of Justice and a group of state Attorneys General were scheduled to finally announce the terms of a settlement with the nation’s biggest banks over the banks’ foreclosure fraud abuses. However, the announcement was canceled at the last minute, leaving the status of the settlement where it has been for several months: in limbo.

Part of the hesitation on the part of several of the AGs is that a settlement would limit investigations into the extent of the fraud perpetrated by the banks. In the meantime, between shoddy foreclosure and faulty loans, the biggest U.S. banks have already lost $72 billion — with the most losses coming at Bank of America — and are preparing to lose even more:

Costs from faulty mortgages and shoddy foreclosures have topped $72 billion at the biggest U.S. banks as they near a settlement of a 50-state probe into the industry’s practices.

Wells Fargo & Co., Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Ally Financial Inc., the five largest home lenders during the real estate boom, tallied at least $6.78 billion in new costs tied to mortgages during the second half of 2011, according to data compiled by Bloomberg. Bank of America, ranked second among U.S. banks by assets, contributes $41.8 billion of the overall total.

“It’s a colossal failure of basic banking,” said credit analyst David Knutson. “It’s surprised everyone in terms of persistence and longevity and I think it will continue to surprise.”

Foreclosure fraud has been going on at the biggest banks since at least 1998. According to a New York Times report over the weekend, government backed mortgage giant Fannie Mae also knew about the shoddy foreclosure practices as far back as 2003, but did nothing. The more facts that come out regarding the extent of foreclosure fraud, the more it seems that further investigations and potential court action is warranted.

Last month, JP Morgan Chase — the largest bank in the United States — launched a project to digitize the documents of Martin Luther King Jr. and other civil rights leaders, making them available on the internet. “It’s important for JPMorgan Chase to support Dr. King’s legacy because of the important values he committed his life to promoting, such as equality, equal opportunity, and quality education for all. People like Dr. Martin Luther King are what made America what it is today. The values he espoused are the values that JPMorgan Chase also tries to stand for around the world,” said JP Morgan Chase CEO Jamie Dimon.

But at the same time, as Change.org has noted, the bank is on the verge of foreclosing on a 78 year-old former civil rights activist:

Helen Bailey is a 78-year-old grandmother who participated in the civil rights movement, worked as a childcare provider for autistic children, and was a community volunteer. She has paid her mortgage since 1999, but now she can’t keep up the payments. All she wants is to stay in her home until she dies, in the neighborhood where she feels safe and has lived for nearly quarter of a century. She could have refinanced with a company willing to let her live in the house for free until her death, but Chase Bank would not reduce her principal by $9,000. She’s been paying 7% interest, well above most rates, so Chase could have decided they had made enough. Instead, they have started foreclosure…While Chase tries to tie itself to the incredible legacy of Martin Luther King, who really did believe in communities, Chase tries to throw a grandmother who marched for civil rights out onto the street.

“JP Morgan Chase must practice what it preaches,” said Gary Flowers, Executive Director and CEO of the Black Leadership Forum, Inc. “On one hand, the bank cannot earnestly invoke the values of Reverend Doctor Martin Luther King, Jr., while devaluing the very principles for which he lived and died.”

This is not the only mortgage-related issue JP Morgan has brought upon itself recently. Last year, JP Morgan found itself in hot water for overcharging members of the military on their mortgages, eventually agreeing to a $56 million settlement. The bank even sold off the home of a military member on the very day that he returned from Iraq.

One former JP Morgan banker told Reuters, “I don’t say this lightly, but the consumer is simply an income stream and exploiting that is the purpose of the banking organization.” And evidently that exploitation extends to touting the bank’s commitment to civil rights with one hand while foreclosing on a former civil rights activist with the other.

About 20 California activists surrounded a local home this weekend to prevent Freddie Mac and Chase Bank from foreclosing on the property, even amid rumors that sheriff’s deputies were coming to seize it. The Riverside, California home belongs to Arturo de los Santos, a former Marine who told Riverside’s City News Service that he fell behind on his payments when business plummeted at the factory where he’s employed.

De los Santos said he applied for a modification to his mortgage to lower his monthly costs, only to be rejected by Chase. The bank then initiated foreclosure proceedings, and a local judge granted possession to mortgage giant Freddie Mac, which guaranteed the loan, last week. That allows the local sheriff to seize the property, a situation de los Santos and the Occupiers are trying to prevent, CNS reports:

He said around 20 demonstrators are staying inside and outside the three-bedroom property.

De los Santos told CNS last week that he was prepared to get arrested to spotlight how “the bank is messing up.”

The former U.S. Marine sent a letter to Sheriff Stan Sniff explaining his circumstances and asking the county’s top law enforcement officer not to carry out an eviction.

De los Santos’ story, unfortunately, has become all too common. President Obama’s foreclosure prevention programs have fallen woefully short and Republicans in Congress refuse to take steps — such as taxing large banks to pay for further homeowner assistance — to alleviate the nation’s housing crisis. Banks and lenders, meanwhile, have made the problem worse, perpetuating fraudulent foreclosures, illegally foreclosing on military members and other homeowners, and foreclosing on homes they don’t even own.

Across the country, Occupy Our Homes has drawn attention to these problems by placing homeless families in vacant homes, disrupting foreclosure auctions, and forcing banks to renegotiate mortgage terms on properties in foreclosure. “I know because of them I am still in my home,” an Atlanta woman said of the Occupiers in December. “They got everyday people like myself involved. Everyday people contacting Chase and advocating for me, peaceful demonstrations, people calling and writing in.”

The Obama administration — in addition to announcing a new mortgage refinancing program, paid for by implementing a tax on the nation’s biggest banks — has introduced another round of fixes for its signature foreclosure prevention program, the Home Affordable Modification Program (HAMP). HAMP has fallen woefully short of expectations, due to a combination of design flaws, bank intransigence, and a significant amount of bank incompetence.

The new HAMP features include expanding the debt-to-income requirements for participation, paying investors more for principal reductions, and extending the program’s application deadline through 2013. According to an analysis from JP Morgan Chase, the changes should aid 500,000 homeowners:

A recent expansion of the Home Affordable Modification Program is expected to result in 500,000 mortgage modifications that otherwise would not have taken place, bank analysts said…JPMorgan Chase [[JPM]] analysts said in a report Monday they expect 1.7 million additional borrowers could qualify for the program under the more lenient DTI requirements – meaning more of their debt not just their first lien mortgage would be calculated in.

The administration’s housing programs have reached just 20 percent of the households they were supposed to, with HAMP helping 910,000 homeowners, far short of the 4 million at which it was aimed. Just a fraction of the money allocated to the program has even been spent.

“The housing crisis has been the single biggest drag on our recovery from the recession,” Obama said in his latest weekly address. “It has kept millions of families in debt and unable to spend, and it has left hundreds of thousands of construction workers out of a job.” Today, the economics bloggers at Calculated Risk predicted that the housing market it at its bottom, while “the list of housing markets showing measurable improvement expanded by 29 metros in February to 98 on the National Association of Home Builders/First American Improving Markets Index released on Monday.”

Hopefully these numbers, as well as renewed interest from the administration in aiding troubled homeowners will result in housing going from a drag on the economy to a boost.