States Divert Mortgage Cash Away From Homeowners

Wednesday, 16 May 2012 12:57 PM

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Money intended to aid struggling homeowners is being diverted in states across the nation to cover their budget shortfalls, The New York Times reported.

The cash is part of a $25 billion national settlement with banks for abuses in mortgage and foreclosure processes and was supposed to go to foreclosure prevention, investigations into fraud and countering the housing crisis.

California’s share in the settlement was more than $400 million. Gov. Jerry Brown has proposed using the bulk of that sum to pay down the state’s debts. Only 27 states have devoted all their funds from the banks to housing programs, a report by Enterprise Community Partners, a national affordable housing group, found according to the Times.

Some 15 states have said all or most of the money will be used for other purposes. Texas put its share, $125 million, into the general fund, Missouri is using its $40 million on higher education, Indiana will spending more than half its amount to pay energy bills for poor families, and Virginia will send most of its $67 million to local governments, the Times reported.

Secretary of Housing and Urban Development Shaun Donovan has been pressing states to use the money as intended. “Other uses fail to capitalize on the opportunities presented by the settlement to bring real, concerted relief to homeowners and the communities in which they live,” he told the Times.

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