Foreclosure Settlement Funds Not All Going Toward Homeowner Relief

Foreclosure Settlement Funds Not All Going Toward Homeowner Relief

When states reached a $25 billion settlement in March with five of the nation's largest mortgage lenders over charges they improperly processed foreclosures, it was hailed as the biggest government-industry accord since the multi-state tobacco settlement in 1998. But the states' share of that money hasn't all been going toward helping distressed homeowners, as expected. 
 
Under the terms of the agreement, Ally Financial Inc., Bank of America Corp., Citibank Inc., J.P. Morgan Chase & Co. and Wells Fargo & Co. were required to provide $20 billion in mortgage relief directly to homeowners. The $2.5 billion states received was supposed to be used "to the extent practicable...for purposes intended to avoid foreclosures," among other things. 
 
But according to a report by Enterprise Community Partners, a housing nonprofit, only about $1 billion of the state funds have been allocated for some type of homeowner relief so far, while $1 billion has been funneled into state general funds. Only 14 states are planning to spend their entire allotments on housing aid, while nine plan to spend most of their funds that way, according to the report. And many of the largest states have opted for the general-fund route. 
 
"It's an incredible frustration," said Andrew Jakabovics, who co-authored the report. 
 
The allocation of the foreclosure funds has touched off battles across the country. Consumer advocacy groups sued Arizona over its decision to designate roughly half of its $98 million payout for general fund use. 
 
"Virtually everything in the settlement is about providing relief for distressed homeowners," said Tim Hogan, executive director of the Arizona Center for Law in the Public Interest and an attorney for the plaintiffs in the suit. "I don't see how you can take these funds for something else." 
 
A state judge dismissed the suit this month. But Hogan said he'll appeal that ruling. 
 
In South Carolina, Gov. Nikki Haley (R) vetoed the Legislature's diversion of $10 million from the state's $31 million foreclosure settlement allocation to a campaign to lure out-of-state businesses, which she called both "inappropriate" and a "raid." The Legislature overturned her veto and allocated the remaining $21 million to the state's general fund. (WALL STREET JOURNAL, EAST VALLEY TRIBUNE [MESA], STATE NET) 

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