Mike Rose: Commerce Slush Fund Subsidized By Mortgage Fraud Victims

“LEGISLATORS SACRIFICED THE WELFARE OF POOR VICTIMS OF FRAUD” By Mike Rose || In 2012 state lawmakers gave $10 million to the S.C. Department of Commerce’s “Deal Closing Fund” and $22 million to the state general fund from lawsuit settlement monies for low-income mortgage fraud victims, instead of spending that…


By Mike Rose || In 2012 state lawmakers gave $10 million to the S.C. Department of Commerce’s “Deal Closing Fund” and $22 million to the state general fund from lawsuit settlement monies for low-income mortgage fraud victims, instead of spending that money on the victims.  What I observed as a State Senator about this $32 million misuse of victim funds is troubling.

Today South Carolina has the eighth-worst foreclosure rate in the US — with 1 in every 850 housing units receiving a foreclosure filing compared to 1 in every 1,058 nationally.  In 2012, foreclosure abuse was so prevalent in South Carolina that 24 Senators (over half the Senate, including 10 Republicans) co-sponsored Senate Bill 702, introduced by me, to regulate mortgage servicers. We introduced no bill to regulate banks because they were already regulated, and 48 states already had sued five major banks alleging foreclosure fraud.

This national lawsuit against banks resulted in a $25 billion settlement, and provided that South Carolina’s share of that money should be used by the “South Carolina Attorney General for a consumer protection enforcement fund; consumer education fund; consumer litigation fund; local consumer aid fund; a revolving fund for consumer restitution, including the administrative costs thereof for attorney fees and other costs of investigative litigation for reimbursement of state agencies.”  Thus, South Carolina expressly agreed to use its settlement monies for consumers.

Nothing in the settlement agreement expressly allowed this settlement money to be spent for a “closing fund” or the state “general fund”, although there was a loophole allowing spending for any purpose not prohibited by law.

The Senate fatefully decided not to spend this foreclosure fraud settlement money on consumers on May 24, 2012. That day my brother, a former Ohio prison warden turned university professor (after running prisons for two years in Iraq), was visiting me at the S.C. Senate.

Norman, whose politics have the blue tinge of the Cleveland, Ohio area where he resides, reported to me learning that Democrat legislators were  complaining about how the Republican-controlled legislature was balancing the state budget with millions intended for foreclosure fraud victims.  Upon inquiry to my  fellow Senators, I became  convinced that the “deal closing fund” was considered so sacrosanct that I could not possibly get a majority of Senators to agree to take away $10 million of lawsuit settlement funds already earmarked for “deal closings.” However, I concluded I  might be able to convince the Senate to spend the remaining $22 million of settlement funds for consumer victims instead of for the state general fund.

Concerned that our legislators were going to betray those who had been dispossessed of their foreclosed homes, on that day I introduced Senate Budget Amendment No. 131 to require $22 million of the $32 million mortgage fraud lawsuit settlement money the state  would receive to be used for its true purpose – aiding  victims of mortgage fraud. My amendment provided that all this money would be given to the “South Carolina State Housing Finance and Development Authority for Homeowners Foreclosure Assistance,” and that of those funds:

• “forty percent shall be used to fund the South Carolina Legal Services for the purpose of representing individuals in foreclosure or who need loss mitigation assistance and to provide counseling to assist individuals in avoiding foreclosure”;

• “[t]he remaining sixty percent shall be used for the Multifamily Bond Program”; and

• “[f]ifteen percent of the net proceeds from the Multifamily Bond Program development projects shall be used to provide funding to the three local housing trust funds; Lowcountry Housing Trust, Community Works of Carolina, and the Midlands Housing Trust Fund, during the Qualified Project Period as defined by the Multifamily Bond Program.”

To my amazement, a Democrat Senator asked me to withdraw the amendment and not force a roll call vote on the issue. As the Senate Journal record shows, a Democrat Senator actually spoke publicly against the amendment. Then another Democrat Senator moved to table my amendment, which was defeated 27-8.  By this vote, 16 Republicans and 11 Democrats teamed up to cause all $32 million of mortgage-victim relief funds to be spent on the “deal closing fund” controlled by the S.C. Department of  Commerce or on projects in the state budget’s General Fund instead of compensating or protecting mortgage fraud victims.

I heard one Senator opine that letting the settlement money be used for business deals by the closing fund would help mortgage fraud victims by helping create new jobs that would benefit the mortgage fraud victims.

How absurd!

I heard another Senator express fear that state employees would not get the pay raise provided in the budget if the $22 million of mortgage-victim fraud monies were removed from the general fund.  Using this logic, state employees got a pay raise on the backs of  mortgage fraud victims.

My brother, a sociology professor, has repeatedly reminded me of this incident; expressed amazement about how Senators voted to spend fraud victim monies for business development and other general fund projects not benefitting the victims; expressed respect for my causing this clearly unwanted roll call vote; and opined that Senators opposing the roll call vote did so because they knew they would vote wrong and did not want to be on record doing so.

This roll call vote showed a bi-partisan willingness of legislators to sacrifice the welfare of poor victims of fraud by diverting monies clearly intended for them to business deals, government pay raises and other unrelated and unintended purposes benefiting the rich.


Mike Rose is a Summerville attorney and four-term former State Senator representing Dorchester, Berkeley and Charleston Counties.  Contact him at

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Philip Branton March 7, 2014 at 9:11 am

Boomerang 101, 404, 901,……..where is the Post and Courier….?? …..where is the victim’s fund account “transparency”………

Joe the Plumber March 7, 2014 at 11:54 am


Martin, Shane
Total — 27

Martin, Larry
Total — 8

The amendment was laid on the table.

Philip Branton March 7, 2014 at 2:53 pm


We feel certain that informational “plumbers” in Columbia and Post and Courier would say that your information is NOT verifiable and is pure conjecture……..can you certify this data….?

+ 2 points……..

Joe the Plumber March 7, 2014 at 6:59 pm





Philip Branton March 10, 2014 at 2:33 am

Joe……………..its Gold star time….


+10 points and daily double

Nancy Yates March 13, 2014 at 2:54 pm

Interesting – some of our most conservative …smh.

ScrewedNSC March 7, 2014 at 9:11 am

Reelect all of your sitting legislatures and this is what we get!

William Wallace March 7, 2014 at 5:39 pm

Remember the tobacco settlement money.
I cannot remember the exact amount, I think around 85 million. Almost the entire amount was used by the Legislature for pork barrel projects! I’m pretty sure none was used to educate people (especially young people) on the dangers of tobacco or for programs to help people quit smoking. Of course, using tobacco is a personal choice; but, the money could have been used for one time costs, not recurring budget items and a great deal was used this way, built into future budgets! Most was pissed down a rat hole by our elected officials!!
Wake up people! We elect and re-elect these people over and over.
It is our fault!!

jimlewisowb March 7, 2014 at 9:52 am

Fucking Cockroaches

Olive Oyl March 7, 2014 at 8:48 pm

I recognize my Senator on the screw-the-poor list below — and I’ll remember that dirt bag next election-time. In office WAY too long … spring cleaning needed.

anonymous March 8, 2014 at 6:04 am

“FORECLOSURE MILLS” aka Scummy Law Firms” in South Carolina

Financial giants have figured out yet another way to profit from fraud. After devastating communities across the country with shady subprime loans, the mortgage industry has launched a new assault on America’s neighborhoods.
Big banks are now outsourcing their foreclosure processing to shady law firms aka “scummy law firms” with a history of breaking the law for a quick buck. These foreclosure scammers forge documents, backdate signatures, slap families with thousands of dollars in illegal fees and even foreclosure on borrowers who haven’t missed a payment.
“Foreclosure mills,” as they are known, have been around for years, but they’ve become a much bigger problem as the mortgage crisis has deepened. Fannie Mae and Freddie Mac spurred the creation of these social beasts decades ago to help them process large volumes of foreclosures quickly and cheaply. Pretty soon big banks and scummy law firms wanted in on the action, and bailout barons at Wells Fargo, Citigroup and Bank of America starting sending foreclosures to these scummy law firms by the thousands.
Banks opt to outsource dirty work “FRAUD” like this for a reason. Foreclosure mills aka “scummy law firms” cut costs for banks by cutting corners—when they can’t compile the documentation needed to push families out of their homes right now, they simply fabricate the documents. Still worse, these guys illegally withhold documentation from borrowers seeking to negotiate loan modifications with their banks—effectively forcing borrowers out of their homes instead of allowing them to cut a deal with the bank. When borrowers actually do straighten things out with foreclosure mills, the scumbags slap them with huge illegal fees.
When it became clear that the couple could not be kicked out of their home, the foreclosure mill tried to charge them $18,500 in fees for mistakes committed by the foreclosure mill and the bank. The foreclosure mill even invented two new people who it said lived in the home in order to demand four sets of legal processing fees instead of two.
If nobody holds the scumbags accountable, then lying, cheating and stealing are very profitable business models. That’s one reason why banks love sending this kind of work to foreclosure mills. While the foreclosure mills and their scumbag lawyers have been bombarded with lawsuits for their trickery, the banks are not directly involved in the funny business. So Citi, BofA, Fannie and Freddie get to cut their costs with shady practices, but they don’t have to shoulder the legal liability for them, even though they must surely know what goes on (if they don’t know, they’re being astonishingly negligent, and should be held responsible).
Much of the housing bust is a story of inadequate regulations allowing banks to swindle society and get away with it. But much of the story is simple, straightforward fraud that has gone unpunished. Financial giants paid other firms to issue fraudulent loans, issued fraudulent loans themselves, packaged fraudulent loans into securities and sold them to investors, lied about their subprime mortgage holdings, invented new financial gimmicks to hide billions of dollars in debt, and even laundered hundreds of billions of dollars in drug money. Banks broke the law and hired other people to break the law for them, scoring big profits without being punished.

South Carolina has the best scumbag Foreclosure Mills in the Country.

southmauldin March 7, 2014 at 10:53 am

I wonder if Mr. Rose was this flustered when the tobacco settlement money (remember that?) was stolen by the Legislature and used for every purpose other than smoking cessation.
I doubt it.

William Wallace March 7, 2014 at 5:45 pm

Sorry South, should have read all posts before posting the Tobacco Settlement!
But, bottom line, you are correct. Around 85 million stolen and wasted on pork barrel projects. Very similar to Obama’s “shovel ready” BS! Almost all wasted and not accounted for, just like Tobacco Settlement!!! Eighty Five (85) million!!!
Wake up people!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Barbarossa March 7, 2014 at 7:37 pm

First of all, any “conservative” who supports litigation against a legal industry that is operating within the confines of the law – which the tobacco industry basically was – is a fraud. Thus, if you consider yourself a conservative, than your Tobacco Settlement argument above shows you to be living a smoke and mirror life. In the end, conservatives don’t seek to shake down businesses in order to feed the government.

Phillip Morris March 7, 2014 at 9:51 pm

You tell em stooge ,I mean friend,

Barbarossa March 8, 2014 at 6:08 am

Wonderful Retort… Moe, Curly, Larry, or whoever you are.

General G March 8, 2014 at 8:30 am

Operation Barbarossa was a great stratigical mistake by Adolph Hitler, bogged him down on the Western Front and played a great part in him losing the war!
The choice of your blog name and your off key posts, in an attempt to misdirect, gives me the impression you are one of these elected corrupt. Or your are as misguided as Adolph himself.

Thorny Rose March 7, 2014 at 11:03 am

Former Senator Rose has all these good ideas, but what he fails to realize is bring an effective senator means getting others to agree with you. His personality doomed many of his well-intended initiatives and he has yet to realize that.

rwwllms March 7, 2014 at 11:28 am

So the Senate stole money that was by law meant to go to citizens who were victims of fraud because Rose is an asshole. Sorry Thorny, not buying this childish excuse. You either do the right thing or you don’t. Typical liberal trying to pass the blame on others for their own personal evil criminal ways.

Peg-Leg Sam March 7, 2014 at 11:35 am

I beg your pardon but I’ve followed his record (because I live in his district) for “general” bills introduced as “primary sponsor” — and for each year he was in office, he was typically second-most-successful or third-most-successful in
(a) introducing “general” bills and
(b) having those “general” bills pass senate, house, and become law.

Many other legislators famously introduce “resolutions” that are passed unanimously — and these are fluff. Rose didn’t do that. “General” bills affect the entire state — all citizens.”

“Resolutions” that so many legislators work on diligently, include “The legislature recognizes Joe Blow as the finest barber in [town] and has been a barber for [years].” Or “This day we honor Miss [name] as being the best third-grade teacher in [county] and she has been a teacher for [years].”

You may personally dislike Rose but you can’t argue with his effectiveness as a legislator — or his compassion for “little people.”

Barbarossa March 7, 2014 at 1:26 pm

So you’re complaining that these funds are going to Commerce for it’s closing fund, of which you deem a “slush fund”. Meanwhile, you’re all weepy about how the money really should be spent…. (1) for the “South Carolina Attorney General for a consumer protection enforcement fund; (2) consumer education fund; (3) consumer litigation fund; (4) local consumer aid fund; (5) a revolving fund for consumer restitution, including the administrative costs thereof for attorney fees and (6) other costs of investigative litigation for reimbursement of state agencies.”

Uh, yeah… talk about a bunch of little “slushies”. Look, I have no problem with you shooting at the closing fund at Commerce; however, please don’t try to convince me that any of that so called garbage you cite above is not also riddled with largesse. Here’s a novel idea, why don’t you return those settlement dollars back to those who were either actually effected or to the taxpayers as a whole. Nope, didn’t think you’d like that idea.

Rocky March 7, 2014 at 3:04 pm

Guess in SC they figured that the people affected by the fraud took up the #$% already, so they wouldn’t mind getting it again.

euwe max March 7, 2014 at 4:35 pm

That mortgage fraud money should have gone to the banks like Citi and Bank of America, not the commerce slush fund!

Green Eyeshades March 7, 2014 at 7:13 pm

Sorry, euwe, but BofA was one of the five banks that signed the consent decree with the Justice Dept. and contributed to the $25 billion mortgage fraud settlement. BofA bought Countrywide Financial, remember? Not one soul at Countrywide or BofA was ever charged criminally.

euwe max March 7, 2014 at 10:19 pm

huh? I didn’t say they were charged criminally. Where did you get that?

Ben March 9, 2014 at 10:02 pm

Rose, before his second loss for Senate seat 38, introduced a bill to have attorneys paid before funeral directors which never saw the light of day. Anytime he champions a cause such as “adopt a cow” make sure you look for the real reason behind his actions.

anonymous July 3, 2014 at 6:16 pm

SunTrust Mortgage Inc. has agreed to pay up to $320 million to resolve allegations that it misled customers seeking loan modifications under a government program established to help homeowners avoid foreclosure

SunTrust Banks Inc., misrepresented or omitted information to borrowers participating in the federal Home Affordable Modification Program and failed to process applications in a timely manner. The company is making up to $274 million available to thousands of customers who suffered financial harm.

Government-sponsored enterprises Fannie Mae and Freddie Mac will receive $10 million, and $16 million will go to law enforcement agencies working on mortgage fraud and related matters. SunTrust also agreed to fund $20 million in grants to housing counseling agencies and to improve its administration of the loan modification program.

Settlement documents say delays in processing HAMP applications prevented some borrowers from pursuing other options to save their homes. Customers also were charged excessive interest and were improperly reported to credit bureaus as delinquent.

“SunTrust’s administration of the HAMP program caused serious harm to the very Americans it was supposed to help,”

Last month, SunTrust and the Justice Department also agreed to a $1 billion settlement to resolve allegations that the company underwrote and endorsed faulty mortgage loans between 2006 and 2012.

anonymous July 4, 2014 at 3:36 am

SunTrust in $320M settlement of US criminal mortgage probe

SunTrust Banks will pay as much as $320 million to resolve a criminal probe into its mortgage unit’s mismanagement of a federal program designed to help struggling homeowners avoid foreclosure during the recession.

The U.S. Department of Justice on Thursday said SunTrust Mortgage Inc misled homeowners who sought relief through the Home Affordable Modification Program about how long it would take to review their qualifications, and how they would be treated during “trial periods.”

As a result, thousands of homeowners suffered harm including damaged credit scores, excess interest payments, and an inability to pursue other options to ease financial stress, the Justice Department said.

The Atlanta-based bank said it “accepts and acknowledges responsibility” for “numerous” shortfalls in administering HAMP from March 2009 through December 2010.

The shortfalls included reporting as many as 75 percent of trial-period customers who were current on their mortgages as being delinquent, and once stacking backlogged, unopened HAMP applications so densely that the floor beneath them buckled.

“SunTrust’s mismanagement drove up foreclosures, decimated individual credit and increased costs for hard-working men and women across our nation,” Attorney General Eric Holder said

“This resolution will provide much-needed restitution for victims,” he continued. “It will make available substantial funds to help other homeowners avoid foreclosure. And it will result in the kinds of systemic changes needed to ensure that this will not happen again.”

SunTrust on June 17 had reached a $968 million settlement with the Justice Department over other questionable mortgage practices.

SunTrust agrees to nearly $1 billion settlement

SunTrust will pay at least $179 million, and as much as $274 million, in restitution to harmed borrowers.

It will also pay $10 million to government-controlled mortgage finance companies Fannie Mae and Freddie Mac, $16 million to combat mortgage fraud and $20 million to counsel distressed homeowners.


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