As part of well-publicized mortgage servicing settlements, individual states were provided $2.5 billion to help improve certain aspects of the housing crisis. However, according to a recent USA Today article, many states used the funds to help fill holes in their general budgets or for other reasons largely unrelated to housing. How much? As much as $1 billion of the $2.5 billion allocated to the states.
Texas put their $135 million piece of the pie into their general fund. Arizona spent about half of their $98 million to balance their budget. Georgia has allocated their entire $99 million on economic development. Seventy five percent of Kansas’ $14 million went to their general fund. Nebraska’s $8 million is sitting pretty in their “rainy day” fund and all but ten percent of Virginia’s $67 million went into their general fund.
While it is (obviously) within the states’ rights to spend the funds as they see fit, banks aren’t paying them to plug holes in their budgets. They’re (attempting) to make amends for serious mortgage-related offenses. These funds were meant to aid states in providing relief to their citizens who are facing similar issues as those whose unfair treatment was the reason behind the settlement in the first place.
As with most things, there is also a positive side: Connecticut used $22 million of its $26 million to resurrect their previously defunded emergency mortgage assistance. Colorado spent nearly half of its $50 million to help homeowners modify their loans, and the rest of the money on counseling and legal services. Pennsylvania has set aside ninety percent of its $67 million for its housing finance agency. *Applause*
This is in addition to the roughly $51 billion going directly to homeowners in the form of restitution for past wrongdoing, loan modifications, principal reductions and other types of relief meant to help currently struggling homeowners. You’d be hard pressed to find someone who believes that the banks have made full amends, but something it better than nothing. With that said, we’re not quite out of the woods yet: New York Attorney General Eric T. Schneiderman announced last week that he is suing Wells Fargo for failing to meet new servicing standards – also part of the settlement.
To be continued…Tweet