Tracking the Bank Settlements: A Nonprofit Backed by Banks

This is the fourth in a series examining some $82 billion of penalties paid by the banks over bad mortgages.

NEW YORK (TheStreet) -- Enterprise Community Partners, a nonprofit housing organization with a for-profit subsidiary, has gained some prominence as an objective, dispassionate tracker of multibillion dollar mortgage settlements, such as Thursday's $16.65 billion agreement with Bank of America  (BAC) .

However, while Enterprise is often referred to in press reports simply as a "housing nonprofit," the organization has well-established ties to the banking industry. Enterprise receives donations and other financial backing from JPMorgan Chase  (JPM) , Citigroup (C) , Bank of America and Wells Fargo (WFC) , among many other big financial companies.

Representatives from those banks also sit on Enterprise's Board of Trustees alongside representatives from other nonprofits, some academics and the actor Edward Norton. Norton is grandson of the organization's late founder, real estate developer James Rouse.

Despite their extensive involvement with the organization, the banks haven't influenced the organization's reports on banking settlements, said Andrew Jakabovics, Enterprise Senior Director, Policy Development & Research and author of some of the reports, in a phone interview with TheStreet.

Several news articles cited Enterprise's findings: at least two in The New York Times, one in The Wall Street Journal and one from USA Today and Pew Charitable Trusts; they described Enterprise as a  "housing nonprofit" or "national affordable housing group" without disclosing Enterprise's ties to the banks. 

Enterprise hasn't tried to hide its involvement with big banks. It discloses a list of donors and board members on its Web site and it issued a press release when it received a $1 million grant from JPMorgan last year. 

On the other hand, an Enterprise report in February on a $13 billion settlement with JPMorgan and federal and state authorities makes no mention of the organization's ties to JPMorgan.

"They didn't fund any of our research so we didn't think it was relevant. Enterprise acknowledges all funders of our research for specific projects," wrote Jakabovics, in comments forwarded to TheStreet by Enterprise spokesman Jon Searles.

In its analysis of the JPMorgan settlement, Enterprise concluded, "to the extent that more bank settlements are forthcoming, this agreement -- with some tweaks -- presents a reasonable model from a consumer perspective."

Not everyone agrees. Better Markets, a nonprofit Wall Street watchdog, has filed suit against the Justice Department, challenging the JPMorgan settlement in part because it will keep the public from knowing more details about the fraudulent activities uncovered by the authorities. Several commentators contend the $4 billion non-cash portion of the settlement -- and intended to benefit consumers -- is a sham.

"The bulk of the consumer benefits promised have already been paid out before the fines were imposed," contended Rafferty Capital Markets analyst Dick Bove in an Aug. 15 report discussing the JPMorgan settlement and others like it.

Also problematic is that states hardest hit by the mortgage crisis, such as Florida, Nevada and Arizona, will receive no cash from the settlement because their attorneys general haven't been aggressive in going after banks or lack the authority to do so. By contrast, New York's housing prices have fully recovered, according to per state data from CoreLogic. Yet New York will get more cash than any other state from the JPMorgan settlement and others like it because Attorney General Eric Schneiderman has been more aggressive and has a powerful tool for going after securities fraud in the state's Martin Act.

As with the Bank of America settlement announced Thursday and the Citigroup settlement last month, very little of the cash from JPMorgan settlement will go to investors who lost money as a result of the mortgage-backed securities at issue in the case.

JPMorgan spokeswoman Amy Bonitatibus wrote TheStreet via email: "We had no involvement in the Enterprise report and never even saw it until it was published. We're going to decline to comment further."Founded in 1982 by Rouse and his wife, Patty, Columbia, Md.-based Enterprise Community Partners gathers funding for affordable housing through a for-profit subsidiary, Enterprise Community Investment. Those profits help fund the not-for-profit parent, which issues grants, advises real estate developers and weighs in on policy issues, partly through reports such as the ones that track the bank settlements.

"This is kind of the genius of it," said Rick Lazio, an Enterprise board member, former New York Congressman and JPMorgan executive who is now a partner at law firm Jones Walker, in a phone interview. Lazio said many of the employees of Enterprise's for-profit subsidiary have private sector experience.

"They tend to think commercially in terms of process, but are motivated by a public mission," Lazio said.

One of Enterprise's board members from the nonprofit world is Sheila Crowley, president of the National Low Income Housing Coalition.

Crowley wrote via email that "as a member of the Enterprise board, I am not the right person to talk to the press about the organization." She added that she chose to sit on the board because "a representative from NLIHC has been on the Enterprise board since its founding. It is a long standing partnership that goes back to the friendship between NLIHC Founder Cushing Dolbeare and Enterprise founders Jim and Patty Rouse. There has also been an Enterprise person the NLIHC board for at least two decades."

Enterprise researcher Jakabovics wrote via email that he and his colleagues plan to continue to track future bank settlements related to mortgage-backed securities. At least 11 more settlements are expected, including ones with Morgan Stanley  (MS) and Goldman Sachs  (GS)  Both of those companies are donors to Enterprise and have representatives on its board of trustees.

Meanwhile, the press appears have changed how it describes Enterprise. An Associated Press article published Wednesday called it "a nonprofit run by executives from low-income housing groups and major banks."

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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