Some money from mortgage settlement to be diverted

Feb 22, 2012, 10:47 PM

Associated Press

JEFFERSON CITY, Mo. (AP) – The ink wasn’t even dry on a settlement with the nation’s top mortgage lenders when Missouri Gov. Jay Nixon laid claim to a chunk of the money to avert a huge budget cut for public colleges and universities.

He’s not the only politician eyeing the cash for purposes that have nothing to do with foreclosure. Like a pot of gold in a barren field, the $25 billion deal offers a tempting and timely source of funding for state governments with multimillion-dollar budget gaps.

Although most of the money goes directly to homeowners affected by the mortgage crisis, the settlement announced this month by attorneys general in 49 states includes nearly $2.7 billion for state governments to spend as they wish.

Some are pledging to use it as relief for struggling homeowners or to help related initiatives such as a Michigan plan to assist children left homeless by foreclosures. But several states are already planning to divert at least some of the money to prop up their budgets, and more will be wrestling with those decisions in the coming weeks.

For some consumer advocates, the diversion is reminiscent of the 1998 tobacco settlement in which states spent billions on projects that had nothing to do with curbing smoking.

“We shouldn’t be in the position of taking money that is intended to help consumers and their mortgage tribulations and putting that to another purpose,” said Joan Bray, a former Democratic Missouri senator who now is chairwoman of the Consumers Council of Missouri.

States that use the onetime payout for immediate expenses may also face the question of what to do next year when the money is used up. But officials in struggling states say they must deal with the most immediate problems first.

A federal judge in Washington could approve the final settlement by the end of February. Once that happens, money could begin flowing to states within a couple of weeks, arriving just as lawmakers are crafting budgets for the upcoming fiscal year.

Republican legislative leaders in Missouri have already embraced the Democratic governor’s plan to use nearly all of the state’s $41 million settlement payment to help shore up the budget. The mortgage money allowed Nixon to reduce his proposed funding cut for public colleges and universities from 12.5 percent to 7.8 percent _ potentially easing student tuition increases.

The money was “as we looked at it, relatively unfettered,” Nixon said. “Clearly the economy was affected all across the country by foreclosure challenges, and I think it is apt and appropriate to use those dollars to help restore some of the challenging cuts that I was forced to make.”

In Pennsylvania, where a fourth straight budget deficit is projected, Democrats are pressing the Republican-run attorney general’s office to use some of its $69 million payment to offset $2 billion in cuts to programs that benefit education, the elderly, disabled or poor.

“The governor’s budget has so many cuts to so many valuable programs, if the attorney general’s office has $69 million, why not use that to offset these cuts to essential programs?” said state Rep. Joe Markosek, the ranking Democrat on the House Appropriations Committee.

Vermont plans to use $2.4 million from the settlement to help balance its budget. Maryland Attorney General Doug Gansler said about 10 percent of his state’s $62.5 million payment will be made available for the governor and lawmakers to spend as they choose.

In Wisconsin, Gov. Scott Walker wants to use $26 million to plug a state budget hole because the foreclosure crisis had a “direct impact on the economy.” But the Republican governor’s plan has ruffled some Democrats, including Milwaukee Mayor Tom Barrett.

St. Louis homebuilder Bob Suelmann, who has a background in real estate and finance, said it’s “ridiculous” for states to divert mortgage settlement payments to other purposes.

“It’s like taking tax money that was supposed to go to road improvements, and then suddenly the bridges are falling down and you don’t know what to do about it,” Suelmann said. “That money should go to something that can directly improve the situation with the housing program.”

When the tobacco settlement was reached, states initially promised to beef up public health with the $206 billion paid out over several decades. Instead, much of the money went to general government operations. State funding for tobacco-prevention programs has now fallen to its lowest level since 1999, according to recent estimates.

“The lesson is advocates have to be vigilant,” said Marie Cocco, a spokeswoman for the Campaign for Tobacco-Free Kids.

Most states will probably use the money for mortgage-assistance hotlines, mediation between borrowers and lenders, legal aid and financial counseling, said Geoff Greenwood, a spokesman for Iowa Attorney General Tom Miller, who was the lead negotiator on the settlement.

But, he added, officials “have to acknowledge that there has been damage done to states and their budgets and their services because of this mortgage crisis. …So states will have some flexibility in how they spend” the money.

Illinois Attorney General Lisa Madigan said she will oppose any efforts to use the money to prop up the state’s shaky budget.

California, which was one of the hardest hit states by the mortgage crisis, will receive the largest payment _ about $430 million at a time when the state is facing a $9.2 billion deficit. A spokesman for Gov. Jerry Brown said no decision has been made on how to spend the money.

Some consumer advocates say they will be watching closely to see where the payments are spent.

“As insufficient as it is,” said Kathleen Day, a spokeswoman for the nonprofit Center for Responsible Lending, “this money was intended to go directly to help struggling homeowners.”

___

Associated Press writers Chris Blank in Jefferson City; Marc Levy in Harrisburg, Pa.; Scott Bauer in Madison, Wis.; David Gram in Montpelier, Vt.; Brian Witte in Annapolis, Md.; Beth Duff-Brown in San Francisco; Chet Brokaw in Pierre, S.D.; Tim Martin in Lansing, Mich.; Christopher Wills in Springfield, Ill.; Randall Chase in Dover, Del.; Norma Love in Concord, N.H.; Rachel La Corte in Olympia, Wash.; and Derek Kravitz in Washington contributed to this report.

(Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)

United States News

Yvette Rodier, who survived a thrill kill and was shot 4 times in 1996, discusses what the survivor...
Amy Donaldson

‘The Letter’ dives into survivor’s trauma after healing from bullet wounds

In the latest episode of "The Letter" podcast, shadows follow Yvette Rodier long after the bullet wounds to her head had healed.
9 hours ago
Associated Press

Amazon suspends at least 50 workers after fire protest

NEW YORK (AP) — Amazon has suspended at least 50 warehouse employees who refused to work their shifts following a trash compactor fire at one of its New York facilities, according to union organizers. The company suspended the workers, with pay, on Tuesday, a day after the fire disrupted operations at the Staten Island warehouse […]
9 hours ago
FILE - A 10-point white-tailed deer walks through the woods in Freeport, Maine, on Nov. 10, 2015. W...
Associated Press

‘Forever chemicals’ in deer, fish challenge hunters, tourism

PORTLAND, Maine (AP) — Wildlife agencies in the U.S. are finding elevated levels of a class of toxic chemicals in game animals such as deer — and that’s prompting health advisories in some places where hunting and fishing are ways of life and key pieces of the economy. Authorities have detected the high levels of […]
9 hours ago
Geneva, Fla., resident Joe Shaw, top, navigates his flooded street, Whitcomb Drive, Tuesday, Oct. 4...
Associated Press

Florida’s island dwellers digging out from Ian’s destruction

ST. JAMES CITY, Fla. (AP) — Following Hurricane Ian’s destruction, many residents on one Florida island have stayed put for days without electricity and other resources while hoping the lone bridge to the mainland is repaired. Pine Island, the largest barrier island off Florida’s Gulf Coast, has been largely cut off from the outside world […]
9 hours ago
FILE - People stand on the destroyed bridge to Pine Island as they view the damage in the aftermath...
Associated Press

Biden to focus on hurricane victims in Florida, not politics

WASHINGTON (AP) — President Joe Biden will visit hurricane-ravaged Florida with a pledge that federal, state and local governments will work as one to help rebuild homes, businesses and lives — putting politics on mute for now to focus on those in need. Hurricane Ian has resulted in at least 84 people confirmed dead, including […]
9 hours ago
Republican candidate for Wisconsin governor Tim Michels speaks during a campaign stop at a bar on T...
Associated Press

In Wisconsin, Michels’ shift on abortion isn’t 1st reversal

MADISON, Wis. (AP) — Republican Tim Michels was talking to a roomful of party activists in early September when he fielded a question about his position on abortion. Michels vowed he would never change, and said he was “winning” his race against Democratic Gov. Tim Evers precisely because people saw him as “a man of […]
9 hours ago

Sponsored Articles

...
Quantum Fiber

How high-speed fiber internet can improve everyday life

Quantum Fiber supplies unlimited data with speeds up to 940 mbps, enough to share 4K videos with coworkers 20 times faster than a cable.
...
Day & Night Air Conditioning, Heating and Plumbing

Ways to prevent clogged drains and what to do if you’re too late

While there are a variety of ways to prevent clogged drains, it's equally as important to know what to do when you're already too late.
...
Mayo Clinic Orthopedics and Sports Medicine

Why your student-athlete’s physical should be conducted by a sports medicine specialist

Dr. Anastasi from Mayo Clinic Orthopedics and Sports Medicine in Tempe answers some of the most common questions.
Some money from mortgage settlement to be diverted