Wed May 16, 2012
Missouri Among States Spending Mortgage Settlement On Other Priorities
Missouri is one of more than a dozen states using funds from a $25 billion mortgage settlement to plug unrelated budget gaps, according to the New York Times and a report from Enterprise Community Partners, an affordable housing group.
The vast majority of the mortgage settlement money is going to homeowners. But about 10 percent of funds has been allocated for state governments, presumably to help ease the effects of the housing crisis. Many states are using that money for programs directly related to housing. But some, like Missouri, are considering those funds discretionary.
In his initial budget this year, Governor Jay Nixon proposed $106 million in cuts to higher education, about a 12.5 percent reduction from last year's budgets. University officials threatened steep tuition hikes and layoffs. So when news of the mortgage settlement broke, Nixon promised the $40 million that Missouri received to state colleges and universities.
Amanda Roberts, housing director at Enterprise Community Partners, said this was going against the spirit of the law.
"There is language in the settlement that says, to the extent practicable, the funds should be used to avoid preventable foreclosures, ameliorate the effects of the foreclosure crisis, enhance law enforcement," Roberts said.
About $17 billion of the settlement will be in the form of credits for loan modifications and foreclosure prevention for homeowners still in their homes. Roberts said her report honed in on the $2.5 billion going to state governments because it's some of the only direct payment money from the banks: "actual checks going to the states."
In most states, the attorney general made the decision as to how funds would be used. Missouri Attorney General Chris Koster allowed for budgeting decisions to be made by the legislature and governor's office.
Joan Bray, a former state senator who is now chairwoman of the Consumers Council of Missouri, said she was disappointed in the state's decision.
"While I'm totally supportive of higher education, the money did come out of the whole foreclosure debacle. There are families stressed under their housing conditions," Bray said. "There's expectations there would try and be some kind of relief there."
According to the New York Times:
States using some or all of their money for housing have designated it for a wide variety of programs, like a small fund for low-interest loans to build housing in low-income neighborhoods, in Virginia, and Ohio's sweeping plan to demolish abandoned property.
In New York, Attorney General Eric T. Schneiderman stepped in with $15 million in settlement money for housing counseling and legal assistance when state support ran out last month, and plans to spend the bulk of its $130 million on similar programs. North Dakota will use its tiny allotment, $1.9 million, to provide housing to police officers and emergency responders in its booming oil-field counties, where shelter is scarce.
The National Mortgage Settlement, as it's called, is the second-largest in history, following only the tobacco industry settlement.
Crisis In The Housing Market