California, Virginia, and Wisconsin are pouring their settlement money into their general funds, where it can be spent on anything from towels for prisons to copy paper for offices. Georgia is spending all of its money to attract business to the state, and Missouri is directing it to higher education. The states don’t seem to understand that the settlement fund isn’t a bundle of found money. It resulted from one of the most painful economic downturns in recent history.
Unscrupulous lenders often tricked naive buyers into exotic and expensive mortgages to buy homes they couldn’t afford. When multitudes of buyers inevitably couldn’t make payments, it triggered the massive foreclosure crisis that pushed the U.S. economy underwater.
Because lenders couldn’t keep up with foreclosures, they took shortcuts in filing court documents. Some even hired people to forge bank officials’ names on foreclosure papers in a practice known as "robo-signing." And now, the much-heralded national settlement of cases brought by states against these unsavory foreclosure practices is turning out to be yet another scam.
Pennsylvania hasn’t crafted a clear plan to spend its $66.5 million. New Jersey plans to use its $72.1 million to fund housing programs, but none are directly related to the foreclosures.
New Jersey housing advocates have rightly asked Gov. Christie to use the funds for their intended purposes. Topping the list should be restoring the highly effective housing counseling program in Millville called A-HOME.
The group has served 2,100 families facing foreclosure since 2009, but has had to lay off four housing counselors and other staffers, leaving it with just two employees, because the state changed its funding format.
A-HOME has had to close more than 1,300 active cases involving families in seven South Jersey counties at a time when experts say the nation is only halfway through the foreclosure crisis.
Pennsylvania should use its funds to revive the Homeowner Emergency Mortgage Assistance Program, which was killed by Gov. Corbett’s budget cuts last year. By extending three-year loans to families, HEMAP has helped 43,000 families since it began in 1983.
The settlement money resulted from the suffering of homeowners; it should be used to ease their pain.