May 23, 2012
States spending settlement money, but not on housing
23 May 2012
Posted by Andrew Kantor
So Virginia got about $66.5 million from the robo-signing settlement, ostensibly for use to help housing. Other states got more or less, for a total of $2.5 billion.
But a report from The New York Times ("Needy States Use Housing Aid Cash to Plug Budgets" and another from ProPublica ("Billion Dollar Bait & Switch: States Divert Foreclosure Deal Funds") found that a lot of that money is going to states’ general funds and is being used for anything but housing.
From the Times:
In a budget proposed this week, California joined more than a dozen states that want to help close gaping shortfalls using money paid by the nation’s biggest banks and earmarked for foreclosure prevention, investigations of financial fraud and blunting the ill effects of the housing crisis.
And ProPublica got into the specifics:
States have diverted $974 million from this year’s landmark mortgage settlement to pay down budget deficits or fund programs unrelated to the foreclosure crisis … That’s nearly forty percent of the $2.5 billion in penalties paid to the states under the agreement.
Here in Virginia, we were able to secure a $7 million appropriation to the state’s Housing Trust Fund but most of the money was allocated for non-housing purposes. Still, as our Housing Trust Fund goes, it’s a start.
The AG turned over the entirety of the funds to the state legislature without stipulations on how it could be spent. House Democrats originally proposed a budget amendment that would funnel the money to housing programs, but it was voted down.
Gave all or most of their settlement money to homeowners:
Colorado, Connecticut, Delaware, Indiana, Kentucky, Massachusetts, Minnesota, New Jersey, New Mexico, Ohio, Pennsylvania, Tennessee, West Virginia
Put all or most in the general fund:
Arizona, California, Georgia, Idaho, Nebraska, Maine Missouri, South Carolina, Wisconsin,Texas, Utah, Vermont, Virginia.
(The others have yet to determine where the funds will go.)