States not using funds on housing
A new study by the Enterprise Community Partners, entitled ”States Fall Short on Help for Housing: Six Months after Mortgage Settlement, Less than Half of States’ $2.5 Billion Has Gone for Housing” reveals that not all dollars states are receiving from the massive national mortgage settlement payout are going toward housing issues, in fact, some funds are being used for general budget shortfalls.
Earlier this year, 49 state attorneys general and the federal government settled with the nation’s five largest mortgage servicers for foreclosure abuses, particularly robosigning of documents without human review prior to repossessing homes. Fully $2.5 billion was to go directly to states to use toward foreclosure prevention programs, prevention and prosecution of mortgage fraud, and community stabilization measures. This new report shows that less than half of this amount will be used as outlined in the settlement, as some states are choosing to use the funds for non-housing issues.
Biggest offender: California
While $588 million has yet to be allocated to the states, $966 million has been slated for housing activities, but a staggering $988 has been put into states’ general funds for non-housing issues, according to the report. Settlement funds have already begun being used for housing activities in Connecticut, Ohio, and Tennessee as agreed upon in the settlement.
Most states have plans for the funds that do not deviate from the original settlement agreement, but Florida and Texas are not sticking to putting the funds completely. Along with California, these are three of the largest recipients of the settlement funds. More egregious than those two states are Alabama, California, Georgia, Missouri, New Jersey, and South Carolina, all six of which plan to use zero percent of the funds on housing.
The report notes, “Despite the central role of the attorneys general in negotiating the settlement, including the stipulations of how they will use their share of the funds, legislatures and governors have often weighed in heavily on how the funds will be spent. This has led to some very public disputes over who has the actual authority to allocate the money.”
Look for this to be a continuing contentious issue for months to come as settlement funds are negotiated, used, or misused.