Indiana’s IOLTA program is preparing to receive a multi-million dollar boost.
The money is coming from a second round of funding released as part of the settlement agreement with the Bank of America as a penalty for financial fraud during the mortgage foreclosure crisis. By the end March, the Indiana Bar Foundation, which administers the state’s Interest on Lawyers Trust Account, should receive $7.13 million.
“This is certainly good news no doubt about it,” said Chuck Dunlap, executive director of the Indiana Bar Foundation. “The challenge is knowing, now that we have this great opportunity, how to really (use it to) have a great impact.”
The infusion of funds is coming after the foundation nearly depleted IOLTA reserves of $3 million as it drew down the money to continue to support the pro bono districts during the Great Recession. However, Dunlap emphasized the settlement proceeds are restricted and cannot be used to fund all the programs and services IOLTA money typically covers.
This will be the second check Indiana’s IOLTA program has received from the Bank of America settlement. In 2014, the U.S. Department of Justice finalized an agreement in which the financial institution agreed to pay $16.65 billion, the largest civil settlement with a single entity in U.S. history.
Initially, the agreement portioned $30 million of the total settlement into the Interest on Lawyers Trust Account programs around the country. Indiana received $584,646.
The second portion is coming from the $490.2 million that, under the settlement agreement, was deposited in the special Tax Relief Payment Account. It was designated to assist homeowners who faced a federal tax liability after they had restructured their mortgages.
But when Congress extended the Mortgage Forgiveness Debt Relief Act, which provided the same tax assistance to homeowners, the settlement funds tagged for tax relief were diverted to other agencies, with state-based Interest on Lawyers Trust Account organizations receiving the lion’s share at $367.62 million.
Now the Indiana Bar Foundation is considering what to do with the money. The funds must be used for either “community redevelopment” or “mortgage foreclosure assistance” but the foundation’s board of directors is reviewing the terms and conditions of the settlement to determine what kinds of initiatives could access the money.
“We want to spend time doing our due diligence and making sure we spend the money in the right way,” Dunlap said.
The foundation plans to contact legal aid providers and the pro bono districts along with Indiana’s Hardest Hit Fund to formulate how the money can be targeted. Dunlap said ideally the money will be used to counter emerging problems instead of trying to catch up to a problem that is already flourishing.
Also with such a large amount of money, the foundation does not intend to release it all at once. As Dunlap explained, the settlement funds could be distributed in $800,000 annual increments for nearly 10 years.