The National Mortgage Settlement was supposed to help underwater homeowners and prevent further disclosures. The settlement was wrung out of the five largest loan servicers (Ally/GMAC, Bank of America, Citi, JPMorgan Chase and Wells Fargo) to provide retribution for their abuses of servicing and improper foreclosures. The settlement was approved six weeks ago. The total is $25 billion and $2.5 billion was to be turned over directly to the attorneys general of the fifty states to manage directly to the homeowners.
Twenty-five states have committed all the money to help homeowners either through direct assistance or other programs. Oklahoma chose not to participate in the program at all.
Nine states are using part of the money for mortgage relief, and part of it for other programs. Indiana is using half of it to assist low-income households with energy bills. Idaho, Utah, Nebraska, Kansas, Wisconsin, North Carolina, Maine and West Virginia have not been as specific as to where they are diverting the funds.
Vermont, Connecticut, Pennsylvania, Minnesota, Mississippi, Alabama and Oregon have not announced how they are using the funds.
I can tell you that Vermont’s budget is sort of under control, the way it usually is (we always assume we need wiggle room and the final figures will not match the hopes and expectations), our home values did not fall the way they did in other states, and we had the lowest foreclosure rate in the country. The current proposal for our $2.55 million is half to housing and half to the general fund.
And then there’s the infamous eight…..Georgia is using their $99.36 million for “economic development” to attract businesses to the state. Missouri is diverting their $39.8 million to bolster education funding. Virginia’s $66.5 million is going it to local governments and Texas just shot it’s $134.6 million straight into the general fund. California just announced that it will use their $410.58 million to help it cope with their extraordinary budget problems. Alaska is putting $1 million to the Division of Banking and Securities and has not announced what the rest of their $3.28 million will be used for. South Carolina is mimicking Georgia and using their $31 million to attract new businesses. South Dakota’s $2.88 million will be used to “enact regulations.”
Among the things this money was intended for was counseling for homeowners, funds to pursue investigations into mortgage foreclosure activities, and assistance in refinancing.
The 2009 stimulus package was supposed go to infrastructure projects, which would have a ripple effect on states’ economies. Too many states used it to plug their budget deficits. Very few used it for infrastructure, and for those who did, it had the desired effect. Those states that diverted the stimulus package have served to “prove” to Republican voters that the stimulus package did nothing for the states. Diverting these funds will also help the Republican Party by expanding the accusation that President Obama has done nothing to help homeowners, though it was probably not the reason behind these decisions.