Attorney General Chris Koster joined in a nationwide suit against the five biggest mortgage servicers, which agreed to a multi-billion dollar settlement to address allegations of foreclosure abuses, unfair mortgage servicing practices, and fraud. Borrowers who lost their homes or are behind on their payments might be eligible for help and reimbursement through the companies involved in the suit: Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, and Ally Financial. 

Koster says there are about ten smaller companies he’s prepared to go after, but combining the five largest servicers into the top tier made sense because of the complexity of the lawsuit and negotiations involving 49 other states. (Oklahoma has not yet signed onto the suit. Koster believes it will.)

“We began this process in August in 2010,” he says. “We got a final deal at 1 a.m. last night.”

His office is embarking a big push to get people on board with the program since it operates on a first come, first served basis.

“This $196 million is not in a bucket here in Missouri,” Koster says. “If we don’t utilize it, California, Illinois and New York will take this money and spend it in their own states.”

“This settlement provides much needed relief to a broad spectrum of Missourians: those who have already been foreclosed on, those who are current on their payments but underwater on their mortgages, and those who are struggling with their current payments but could make more reasonable ones,” Koster says. “Through millions of dollars in principal reductions, this settlement makes it easier for Missourians to stay in their homes.”

Missouri consumers will be eligible to receive the following benefits under the settlement:

• Borrowers whose homes are worth less than they owe and who are current on their payments will be able to refinance, saving Missouri homeowners an estimated $38 million.
• Borrowers whose homes are worth less than they owe and are behind on their payments but who could afford to make them at a reduced rate will receive an estimated $86.5 million in principal reductions and other borrower assistance programs.
• Borrowers who lost their homes to foreclosure from January 1, 2008, through December 31, 2011, and suffered servicing abuse will receive roughly $31 million in direct payments, roughly a $2,000 cash payment to each borrower.

The Attorneys General also negotiated direct payments to the states.  Attorneys General have the discretion on how these funds are used.  Koster said that because the state is facing severe budget shortages, he will direct more than $40 million to the state’s general revenue fund to be used in the state budget.  Gov. Jay Nixon has announced he will use the $40 million to restore funding for the state’s public colleges and universities. 

The five settling financial institutions also agreed to make changes to their processes to ensure more people are able to stay in their homes. Among the new mandated servicing and foreclosure practices, the settlement requires lenders: 

• to implement standards for executing documents in foreclosure cases;
• to make certain disclosures to consumers in advance of foreclosure;
• to implement standards to ensure account and default fee accuracy;
• to help consumers avoid foreclosure through outreach and communication regarding loan modification status;
• to designate a single point of contact to assist borrowers trying to refinance to avoid foreclosure; and,
• to end dual-track foreclosures where consumers are foreclosed on as they were trying to modify their loan.

The settlement does not rule out the possibility of criminal prosecutions, including the indictment Koster announced earlier this week against DOCX, LLC and its former president, Lorraine Brown.  Nor does it prevent homeowners or investors from pursuing individual, institutional or class action civil cases against the five servicers. 

The joint state-federal settlement is the result of a massive civil law enforcement investigation by state attorneys general and state banking regulators across the country, and nearly a dozen federal agencies. 

The final agreement, through a consent judgment, will be filed in U.S. District Court in Washington, D.C., and will have the authority of a court order.

A consumer hotline has been set up for consumers to get more information about the settlement.  The hotline number is 855-870-7676. 

For more, visit http://ago.mo.gov/mortgageSettlementInfo.htm, www.NationalMortgageSettlement.com, www.HUD.gov, and www.DOJ.gov.

AUDIO: Koster talks about who qualifies, how they can get money and help (4:58)

Represntative Doug Funderburk (back, second from left) presides over a meeting of the House Tax Reform Committee.

Representatives Doug Funderburk (R-St. Peters) and Margo McNeil (D-Florissant) have both presented bills to the House Committee on Tax Reform that would enter Missouri into the multi-state Streamlined Sales and Use Tax Agreement. Twenty-four states are a part of that agreement so far, and the legislatures in others are considering bills to join.

Read more about the Streamlined Sales and Use Tax Agreement

Funderburk and McNeil agree the collection of taxes on internet sales would level the playing field for Missouri businesses. McNeil says they are, “being undermined by the antiquated tax system we have that was written in the 1930s and hasn’t taken into consideration the internet.”

The two differ over whether to make the change revenue-neutral to the state. Funderburk says it should be. “The people that I’m working with in trying to get this to the floor, and to a vote, and hopefully one day to the Governor’s desk, we want to make sure, especially in this down economy, that we’re not asking Missourians to pay more taxes than they’re currently paying today.”

Funderburk does not know how he might accomplish his goal yet, however. He explains one idea that has been floated, “taking each year’s collected revenue via the Streamlined Use and Sales Tax and applying it to a lowering of the overall sales tax of the next year.” He says if that idea does not seem feasible, “we’re going to have to look for other avenues.”

McNeil says to not bring in additional state revenue would be to miss an opportunity. “Local cities and counties have a big hole in their revenue bucket, but also the state of Missouri has a large hole in our revenue bucket that is only going to get wider as more people decide to use the internet.”

Take a look at the two pieces of legislation, HB 1356 and HB 1215.

The disagreement mirrors the philosophical difference in opinion that has been stated and re-stated this session between the Republicans in the House, who have said they do not want to increase taxes, and Democrats who say a new revenue source is necessary to balance the budget.

McNeil says, “I think I’m relatively safe in saying my Democratic colleagues are in favor of it staying as a source of revenue in the state of Missouri.

She adds, however, she will not rule out voting for a bill that is revenue-neutral. “There are good reasons to support this bill other than bringing in revenue to the State of Missouri because our local businesses are being undermined and they are going out of business.”

Funderburk, who chairs the Tax Reform Committee, hopes to have legislation ready for a vote in the next two weeks.

AUDIO: Mike Lear reports (1:00)

University of Missouri System interim president Steve Owens (seated, left) testifies before the House Education Committee.

They all said the outlook is not good.

The University of Missouri System President Steve Owens said the 12.5 percent reduction translates to a $50 million dollar hit to the University’s operating budget. He says the college has avoided raising tuition to deal with past reductions, but says that could only work for so long. The college’s staff has recommended a tuition increase of 6.5 percent, that the Board of Curators will begin considering on Thursday.

Owens says state support for full-time equivalent students at MU is down from $10,400 in 2001 to a projected $5,926 in fiscal year 2013, assuming the proposed cut remains.
The messages from most of the institutions were along similar lines. Cuts would result in increased tuition, cuts to faculty and programs, increased class sizes and postponement to needed maintenance.

The state’s community colleges would also have to hike what they charge students, according to Mineral Area College President Steve Kurtz. “Preliminary discussions with presidents and chancellors indicate that statewide average (increase) is about $4 a credit hour.”

Several of those officials said the efforts to deal with the cut was already underway. Northwest Missouri State University President John Jasinski says plans will be announced next week for cuts and restructuring.

He asked the Committee’s lawmakers to consider what message the state is sending to current and future students. “We spend $16 thousand on non-violent, incarcerated individuals and we’re spending 3, 4 and 5 (thousand) on a full student FTE, what’s the value of higher ed there? What’s the whole tobacco tax situation and what’s happening there? What about the amount of money we give to private higher ed institutions?”

Representative Genise Montecillo (D-St. Louis) summed up what the testimony meant to her thusly, “It’s going to be difficult to continue to work towards our goal of having more college graduates.”

The Committee will next meet February 7.

Representatives Jeanie Lauer and Mike Leara are sponsoring language taken from bills in the 2010 special session.

Representative Mike Leara (R-St. Louis) is supporting what he says was the best language to come out of that session, in the freight forwarders tax incentive. It would incent forwarders to take international cargo out of Lambert Airport in St. Louis, rather than other states. “There’s a huge amount leaving from Chicago. It’s very expensive, (there are a) lot of delays for both weather and traffic. This, we believe, is just enough to incentivize the freight forwarders to send it to our state to depart versus other states.” Leara says the language is good, but was buried by some of the things it was tied to in the special session.

At the Committee hearing Chip Casteel, Senior Vice President of Public Policy for the St. Louis Regional Chamber and Growth Association, said China is still working toward a goal of getting half of the freight it ships in-and-out of the United States onto its own jets. It’s at 12 percent of that freight so far, “so they’re looking for alternative places. They’re looking for additional hubs that aren’t congested. They’re looking for new approaches. Frankly, they were looking for the State of Missouri to make a commitment to back up this concept, and they still are.”

The incentives in Leara’s bill could total $60 million dollars over eight years. It would sunset in 2020, but could be extended at that time for another six years.

Leara says he does not oppose expanding the bill to also provide incentives for shipping in-and-out of Kansas City or the rest of the state.

2 bills sponsored by the same representative

Representative Jeanie Lauer (R-Blue Springs) is sponsoring two bills she says were lifted straight out of the special session’s Senate Bill 8.

HB 1244 would promote private-public partnerships to help support technology-based businesses. “This is specific to technology … because that’s the driving direction for the state of Missouri, is to help bring technology jobs into the state. We see that we are losing those not just to the Kansas side but we’re losing them to our southern states as well as our northern states.”

Another bill of Lauer’s, HB 1245, would use incentives from the Missouri Quality Jobs Act to retain jobs already in the state, either through withholding tax retention benefits or a tax credit.

She says the bill includes some taxpayer protections for both incentives. “Both of these avenues have performance measures attached to them and they both have clawbacks, so it certainly takes care of the many concerns that we have all had about companies coming in, getting initiatives, going under and then folks being left to hold the bag.”

Dickson Despommier — a professor at Columbia University in New York — is one of the world’s foremost experts on vertical farming. He tells the Joint Committee on Urban Agriculture the idea has mushroomed since his team of researchers started working on the idea. Despommier says vertical farming is happening in countries that have run out of arable land to feed its people — South Korea, Japan, Holland, England, Singapore. (Holland is building theirs underground with grow lights.) Japan got serious about vertical farming in a sterile environment after contamiation concerns from the Fukushima nuclear incident.

Stateside, in addition to Chicago, there are projects in Milwaukee and Seattle.

The world population is expected to grow by another 3 billion people — that’s 3 billion more mouths to feed, so this is an idea that is going to continue to grow, Despommier says. He says Missouri has the research institutions, the farming interest and the legislative drive to make vertical farming projects successful in this state.

His presentation on vertical farming shows how crops can be grown in industrial buildings amid dense population. “Just Google ‘vertical farming’,” he says. “It’s a really big deal.”

The committee also heard about initiatives in urban aquaculture and community gardening projects. A bill to push such initiatives in the state is expected to come forward soon.

Despommier says to one member of the committee who asked whether it can grow jobs, yes, so long as farmers are displaced by floods, drought and production moving overseas. He says Missouri, one of several states, can certainly identify how Mother Nature has wrecked so many crops.

By the year 2050, nearly 80% of the earth’s population will reside in urban centers. Applying the most conservative estimates to current demographic trends, the human population will increase by about 3 billion people during the interim. An estimated 10⁹ hectares of new land (about 20% more land than is represented by the country of Brazil) will be needed to grow enough food to feed them, if traditional farming practices continue as they are practiced today. At present, throughout the world, over 80% of the land that is suitable for raising crops is in use (sources: FAO and NASA). Historically, some 15% of that has been laid waste by poor management practices. What can be done to avoid this impending disaster? — From www.verticalfarm.com

AUDIO: Jessica Machetta reports (1:10)

Representative Chuck Gatschenberger (R-Lake St. Louis) is sponsoring HB 1455.

The House version, HB 1455, will be carried by Representative Chuck Gatschenberger (R-Lake St. Louis). He says, “Those manufacturers of vehicles … they need brakes, they need windshields, they need trim, they need engines … and not all of those are built right there on that spot.”

Parts makers qualify under the proposal if the products they make are used by an automaker. Companies with at least half of their sales coming from parts used to modify vehicles can also qualify for incentives.

Gatschenberger says it offers two options to those companies. “One is if you employee five employees, you’re gonna get the same benefits with withholding the taxes that you pay from the state for the benefit of the company. The other aspect of it … there’s a lot of companies in this state that are not going to be able to employ five people but they can employ two people. If they do two people and $100,000 of investment in their business, they can fall under the same guidelines.”

Gatschenberger says it also includes some clawback provisions.  ”Let’s say they have those two people but they lay two other people off. Then they lose the benefit. It’s not the specific people that they hire, it’s the total number of people.”

See the Governor’s Office’s release on the introduction of the legislation.

The package increases the standard incentive period to five years, from the three found in the 2010 language. Companies would get a tax break equaling 5 percent of their new payroll if wages are at the average for the county, 5.5 percent for wages that are 120 percent of that average and 6 percent for wages at least 140 percent of the county average.

Senator Kevin Engler (R-Farmington) is the sponsor of SB 691.

Gatschenberger notes the package opens up incentives to all auto manufacturers, not just Ford and General Motors, “So if Nissan thinks, ‘Hmm, we might want to put a plant somewhere but where are we going to put a plant,’ it’s making the carrot bigger and jucier.”

The Governor’s Office says the package boasts a lengthy list of bipartisan supporters. Also in the House are Speaker Steven Tilley (R-Perryville), Majority Floor Leader Tim Jones (R-Eureka), Jerry Nolte (R-Gladstone), Minority Leader Mike Talboy (D-Kansas City), Assistant Minority Floor Leader Tishaura Jones (D-St. Louis), Minority Whip Mike Colona (D-St. Louis), Representative Stephen Webber (D-Columbia) and Representative Bert Atkins (D-Florrisant). Senator Kevin Engler (R-Farmington) is sponsoring the Senate version, SB 691 with Minority Floor Leader Senator Victor Callahan (D-Independence) a co-sponsor.

Governor Nixon’s proposed state budget uses cuts in some programs, services, employees, and subsidies to fill a half-billion dollar hole.  State budget director Linda Luebbering says the biggest funding cut comes in higher education–about $106 million.  “Quite frankly….we don’t have the money,” she says.

Senate appropriations chairman Kurt Schaefer of Columbia says a 12.5%  cut to higher education is “unacceptable.”  He accuses Nixon of balancing the budget on the backs of education for the last three years.

Nixon hopes the legislature will enact a tax amnesty program that might convince people to pay 51 million dollars in back taxes without penalty.  The issue has failed in the past.     

AUDIO: Listen to the budget briefing approx 39:00 mp3

Governor Jay Nixon is greeted by legislators as he leaves the Missouri House Chamber after delivering the State of the State address at the State Capitol in Jefferson City. UPI / Bill Greenblatt

All agree on one thing … much work lies ahead in balancing the state budget. House majority floor leader Tim Jones of Eureka says he thinks the governor is a fine speech giver, but says he was looking for more specifics on where to go with the budget. He thought the speech was largely a repeat from last year, and was more of a campaign speech in an election year than an address to legislators.

“I think the Governor is a fine speech giver but … again, I think the two things I was looking for was a specific plan on what we were going to do this session and also, I was looking for specific proposals from the Governor as to how we’re going to balance the budget,” Jones says.

Minority Floor Leader Mike Talboy of Kansas City says in an election year, every speech is a campaign speech, and that the Governor laid out clear priorities to focus on — budget, job creation, economic development and education — and that specifics will come with budget talks in the coming days.

Both parties agree that the governor’s proposed cuts to higher education are concerning, but that bolstering K through 12 funding is an important priority.

Jones says he was looking for a specific plan on what the legislature is going to do this session and specific proposals from Nixon on how they’ll balance a budget that is $500 million to $700 million short.

AUDIO: Republican Response (pre-recorded / aired after State of State) — 8:02 min.

AUDIO: House Majority Floor Leader Tim Jones interview — 7:39 min.

AUDIO: House Minority Floor Leader Mike Talboy interview — 4:43 min.

AUDIO: Senate leadership response, Mayer, Schaefer — 12:02 min.

AUDIO: Jessica Machetta reports – 1:13 min.

Jay Nixon began by highlighting Missouri’s response to the disasters in the state last year. He keyed on the inspirational words of one Joplin tornado survivor, “always take that extra step.”

Missouri Governor Jay Nixon presents his State of the State Address to a joint session of the state legislature. Picture courtesy, Tim Bommel, Missouri House of Representatives.

Nixon touted that the state has not raised taxes and has reduced the size of government. With his proposed budget, he says, he reduces the state’s payroll by 4,100 positions. A total of 816 reductions are included in the new proposal. He notes the state’s workforce is the smallest its been in 15 years.

The address did not include the specifics of his proposed $106 million cut from the state’s 4-year and community colleges, but he did allude to it.

“To balance our budget in a way that protects our scholarships and academic programs I’m calling on our colleges and universities to continue to look for more ways to cut overhead and administrative costs and run smarter, more efficient operations.”

He said colleges and universities will have to change their business models. An example he offered is the “Innovation Campus” program at the University of Central Missouri.

“Students will enroll in college courses while still in high school and then participate in high-impact apprenticeships throughout the college curriculum.” he says. “Corporate partners will underwrite tuition scholarships and faculty and employees will partner to guide each student.”

Nixon encouraged the state’s institutions to develop similar programs.

The Governor stressed budget priorities, including education.

“For the past three years, even in challenging budget times, we’ve maintained level funding for our K-12 classrooms,” Nixon says. “This year we’re gonna take the next step. The budget I present tonight provides record funding for our K-12 classrooms because it’s the right thing to do.”

Some of Nixon’s calls to the legislature were familiar. In his only chide of the night he said, “For the past three years I’ve called for comprehensive tax credit reform. Some of you in this room stood with me on that issue, others did not.”

Nixon says over the past four years more than $2 billion in state tax credits have been redeemed. He re-iterated the call to pass legislation to retool and reform tax credits. He also urges legislators to create bills on charter school accountability and to increase the number of professionals working with autistic children.

Another priority that carries over is that of campaign finance limits. Nixon told the joint session, “When one person with an axe to grind can make an unlimited contritbution to advance a narrow agenda, when lobbyists for powerful interests can tip the balance in an election, the very foundations of our democracy are at risk.

AUDIO: Listen to Governor Jay Nixon’s 2012 State of the State Address (54 mins.)

AUDIO: Mike Lear reports (1 min.)

Under the measure, 1.5 percent of growth over the previous year could be used for appropriations. Any amount between 1.5 and 2.5 percent would be used to pay off state debt. Any amount beyond that would be divided between two emergency funds that would replace the current Budget Reserve Fund, more commonly called the Rainy Day Fund. When those funds are full if there is more growth, it could go toward a state income tax refund.

The proposal is part of the House Republicans’ legislative plan, the “Blueprint for Missouri.”

The Committee voted 20-9 to pass the resolution, with Representative Chris Kelly (D-Columbia) the only Democrat to favor it.

Kelly offered an amendment that made the 2008 budget year the baseline for the resolution, when general revenue was roughly $8 billion dollars. That means the amendment would not kick in until the fund reached that level, which lawmakers agreed is unlikely in the forseeable future.

Burlison says the change would stabilize the budget process and prevent the creation of programs in years of excess only to have them cut when the economy takes a down turn. He says now is the time to enact the resolution, when the economy is down. “We’re experiencing the difficult end of this. We’re looking back and saying if only legislators prior to us had had something like this in place then we wouldn’t have been having to make some of these very difficult cuts that we’re making today. We would have had money in reserves…in savings that we could go to.”

An almost partisan split

Among those opposing the bill, Representative Genise Montecillo (D-St. Louis) says she worries that even in the high mark year of 2008 some funding levels were not sufficient. “Even if I could get all the money in the world for education I have some concerns for social services as well. So, it seems to me that we’re kind of locking some groups into a continued future of being under funded when our needs in our state are becoming greater with unemployment still at really high levels.”

Other Democrats criticized that Republican leadership is trying to limit spending while offering no plans to generate more revenue such as increasing the cigarette tax or collecting internet taxes. 

Representative Kelly countered, “As you know, I am a big supporter of raising more revenue around here, but raising revenue is a different question than managing the revenue that we have.”

Representative Burlison noted that the resolution exempts new or increased tax revenues or fees that are voter approved from appropriations growth limit calculations for the year they are passed.

The measure moves on to the Rules Committee, which meets tomorrow at 9:30 a.m. As a constitutional amendment, it would eventually have to go before Missouri voters.