As you can see from our breakdown [1], 15 states have so far allocated over half their amounts to consumer-focused efforts. But the uses range widely. In Ohio, $75 million has been set aside to destroy some 100,000 abandoned homes. In Minnesota, the state is setting up a fund to compensate victims of the banks’ foreclosure abuses.
In two of the states most affected by the foreclosure crisis, California and Arizona, the attorneys general had intended to use most of their funds on homeowner-related efforts before the governors intervened.
After California Attorney General Kamala Harris prepared a proposal to spend the money on counselors, lawyers, and other consumer-related efforts, Gov. Jerry Brown released a proposed revised budget last week that used the state’s $411 million for existing housing programs [5]. In other words, the money would just be used to help fill the state’s $16 billion budget deficit [6]. Harris opposes the move, which still must make its way through the state legislature for it to become law.
In Arizona, the attorney general had similar plans. Then state lawmakers and the governor took $50 million of the $98 million coming the state’s way. Although the budget legislation stated that the money should be used to fund departments related to housing and law enforcement, there will be no new spending. Housing advocates are readying a lawsuit to stop the transfer and expect to file in the coming month, said Valerie Iverson, Executive Director of Arizona Housing Alliance.
Several other large states have diverted most or all of the money:
• Georgia directed all of its $99 million to programs designed to attract new businesses. A spokesman for the governor said,“He believes that the best way to prevent foreclosures amongst honest homeowners who have experienced hard times is to create jobs here in our state.”
• In Missouri, the state legislature used almost all of its $39 million to fund higher education, which had been slated for cuts. The attorney general’s office kept $1 million for hotlines and outreach related to the settlement.
• Virginia put the entirety of its $66.5 million into the state’s general fund without restrictions. In March, Democrats proposed a budget amendment that would funnel that money to foreclosure prevention and homeownership programs, but it was voted down [7].
• Wisconsin Governor Scott Walker announced soon after the settlement [8] was finalized that the bulk of it—roughly $26 million—would go into the state general fund. Two million went to an economic development fund, including funds for demolition in blighted neighborhoods. Many state Democrats and housing advocates opposed the plan [9], but failed to block it.
• Texas directed its $135 million to the state’s general fund, of which $10 million has been allocated for basic services to low-income Texans. The legislature won’t formally decide what to do with the rest until next January because it meets only once every two years. John Henneberger, co-director of Texas Housers, an affordable housing group, said that in speaking to legislators, advocates had “received no assurances that this money will be used according to the purposes of the settlement.”
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