Cash-strapped states divert half of the funds from national mortgage settlement
Six months after finalizing the landmark National Mortgage Settlement, less than half of the states’ $2.5 billion share has gone for housing. That’s the conclusion of a new report released this week by Enterprise Community Partners, a housing nonprofit.
The settlement money was intended to help prevent foreclosures, stabilize communities, and prevent or prosecute financial fraud, but cash-strapped states are quickly finding other uses for that money:
“Realistically, $2.5 billion in unanticipated funds flowing into state government is a windfall at a time when most states are facing severe budget shortfalls. While disappointing for those who believe states’ settlement proceeds should be used for housing-related purposes, as the settlement intended, it may not come as a surprise that eight states have deviated from the agreed upon uses of the funds.”
In Georgia, lawmakers diverted the bulk of the state’s $99 million to an economic development program. In South Carolina, legislators earmarked $21 million for the general fund and $10 million for incentives, leaving nothing for housing. In Virginia, $59 million of the state’s $66 million allocation will go into that state’s general fund.
It’s not all bad news for housing advocates. Twenty-three states are credited in the report with using all or substantially all their funds for housing.
North Carolina was among five states to have allocated between 70 and 89 percent of their funds for housing.
Of the more than $60 million the Tar Heel state received, here’s how the money will be spent:
- $14 million of the direct settlement are going into the state general fund as civil penalties (with $5.7 going towards the public schools).
- $20 million will go towards funding housing counselors through the state Housing Finance Agency.
- $12 million will go towards supporting legal assistance efforts.
- $10 million will go towards increasing prosecution of lending and financial crimes
- $5 million will go to support the state AG’s office division of Consumer Protection.
To read the full report by Enterprise Community Partners, click here.