Mortgage settlement money fixes government budgets
Money from the National Mortgage Settlementthat struggling homeowners were counting on for relief is being channeled to plug state budget deficits instead. According to a report by Enterprise Community Partners (ECP), a group that supports affordable housing, roughly 15 states have said they will use all or most of the settlement dollars for other purposes.
When 49 state attorneys general and the federal government reached the settlement with the five largest loan servicers in the U.S., it was assumed that much of the settlement’s award monies (valued at $25 billion) would be used as relief for distressed homeowners and other borrowers.
The ECP report shows 11 states are putting some or all of the settlement dollars into their general fund, while 5 states will spend funds on law enforcement or more litigation. Twelve states will spend funds on housing counseling and 16 states will spend the funds on foreclosure prevention or neighborhood stabilization activities.
California may use its settlement dollars to pay down state debt or fill budget holes. Virginia will spend the bulk of its $67 million settlement money as aid to local governments. In Georgia, the state’s $99 million in settlement dollars will be used to pay for economic development projects.
The ECP report says, “For most states, the attorney general is the direct recipient of the funds and the sole decision-maker as to how the funds will be used. However, state constitutions differ, and several states noted in the settlement that the final appropriations decision would be made by the legislature.”
Ali Solis, senior vice president of public policy and corporate affairs at ECP, told Govpro: “We believe the National Mortgage Settlement money should be used for a broad range of housing purposes, which is its intended purpose. States know their housing needs best and we respect their decisions as to how to use the money for their specific needs. However, we feel that it would be a disservice to distressed communities if the money was not used for housing purposes.”
In its report, ECP said the timing on settlement money spending decisions varies from state to state. Some states, the report said, have made up their minds on how to spend the money, and others are still in the process. The report tells housing advocates who would like to see the funds used for housing or foreclosure prevention activities that they “must understand the decision-making process and timing in their particular state in order to be impactful.”