Study: Wells Fargo Foreclosures Cost Minnesota Public Schools $28 Million
A new study from Minnesota Neighborhoods Organizing For Change reveals that the foreclosure crisis is hurting America's schools: Communities are being crippled by the loss of millions of dollars in state education aid as evictions destroy the tax bases and enrollment numbers of school districts.
The group estimates that the roughly 13,000 foreclosures in Minneapolis since 2006 have resulted in some 4,000 students leaving the school system, and since two thirds of state funding for Minnesota public schools is dependent on enrollment figures, nearly $150 million in help has been forfeited, leaving a huge burden on the local tax base.
"The thing that jumps out at me is that there are all these unintended consequences of mass foreclosures," Mike Konczal, a research fellow at the Roosevelt Institute, told The National Memo. "Foreclosing on a family disrupts the way we deliver goods and services and disrupts communities. It disrupts schools even further, and the funding mechanisms for local schools, making it even harder to get through a period already difficult for so many Americans."
The big banks, as usual, are the worst culprits. The study estimates Wells Fargo alone has been responsible for some 300 foreclosures in the past 12 months, and the loss of $28 million in education funding since the housing crisis began in 2006.
Just this summer, Wells Fargo was assessed an $85 million civil penalty -- the largest ever in a consumer-enforcement case -- for illegally directing customers toward expensive subprime loans even when they qualified for lower rates. There's also evidence that they are inclined to directing blacks and Latinos to subprime mortages while steering whites to cheaper, safer ones.
Finally, there is the emotional toll on children forced to pack up and move and switch school districts, often in the middle of a school year.
"We ultimately decided we [as a nation] are going to spend this crisis foreclosing on 5 or 7 million families," added Konczal. "We’re going to foreclose on 2 million people this year. We haven’t thought through the consequences of this."
The multi-state settlement being negotiated against the biggest banks for their illegal foreclosures and role in the housing crisis remains the single greatest means by which we might seek justice for these bad actors and correct some of the externalities caused by their risky, predatory lending. And the authors of the study, like many housing advocates, would prefer no deal to a bad one that lets banks off the hook with limited liability.
"With few exceptions, there's not going to be any group that thinks they’re going to benefit if more foreclosures than are unnecessary go through," Konczal said. "So it doesn’t surprise me that groups looking closely at the impact on communities would say a bad deal is worse than no deal. It’s going to continue to devastate the things we care about."