States Diverting Monies Meant for Homeowners to Cover Budget Deficits
Thursday, May 17, 2012
(Photo: Felipe Leon, flickr)
When the Obama administration ran interference and helped to get a huge legal case settled against the nation’s largest banks over mortgage fraud and improper foreclosures, more than $2 billion in cash was sent to the states to help struggling homeowners. But many of these states’ residents won’t be getting any relief because the money is being diverted to cover budget shortfalls.
As part of the $25 billion national settlement with five banks (a settlement second only to the $206 billion that 46 states reached with big tobacco in 1998), about $2.5 billion in cash was allocated to assist homeowners and mitigate the effects of foreclosures.
But only 27 states have decided to devote all their funds from the banks to housing programs. Another 15 states plan to use all or most of the money for other purposes.
In California, Governor Jerry Brown intends to spend his state’s share ($400 million) on closing a $16 billion budget deficit. Texas put its $125 million into the state’s general fund, while Missouri allocated its $40 million on higher education. Indiana is spending more than half its money to pay energy bills for low-income families, and Virginia intends to help local governments with its $67 million from the foreclosure settlement.
To Learn More:
Needy States Use Housing Aid Cash to Plug Budgets (by Shaila Dewan, New York Times)
The Obama Mortgage Settlement is Just Another Bank Bailout in Disguise (by David Wallechinsky, AllGov)
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