States Shift Foreclosure-Suit Funds to Help Close State Budget Gaps

States Shift Foreclosure-Suit Funds

When states received $2.5 billion from big banks in a mortgage-foreclosure settlement earlier this year, the expectation was that most of it would be used to aid distressed homeowners. But so far, less than half of the money has been designated for that cause—with much of the rest going to help close state budget gaps, says a report scheduled for release Thursday.

In March, 49 states reached a $25 billion settlement with five of the nation’s largest mortgage lenders over charges that they had improperly processed foreclosures.

The agreement allowed the banks—Ally Financial Inc., Bank of America Corp., BAC -0.69% Citibank Inc., J.P. Morgan Chase & Co. and Wells Fargo & Co.—to pay $20 billion of the settlement in the form of relief to distressed homeowners.

The states received $2.5 billion of the total. The agreement said the state money should be used “to the extent practicable…for purposes intended to avoid foreclosures,” among other purposes.

But so far, only about $1 billion of the state funds have been designated for some type of homeowner aid while $1 billion will go toward state general funds. States haven’t decided how to spend the remaining $500 million, according to the report by Enterprise Community Partners, a housing nonprofit.

Rest here…

Copy of the report below…



States Fall Short on Help for Housing

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