More States Consider Diverting Foreclosure Money

By: - February 23, 2012 12:00 am

Missouri political leaders attracted attention earlier this month when they announced that they would use some of their state’s share of a billion foreclosure settlement between big banks and attorneys general — money primarily intended for struggling homeowners — to pay for higher education. Critics said the move undermined the intent of the settlement, which supporters say should provide relief to homeowners and help stabilize the troubled housing market.

But Missouri is not alone. The Associated Press reports that officials in a growing list of other states , particularly those struggling with budget shortfalls, also want to use a portion of their foreclosure settlement money for other purposes.

“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 AP reports.

“Vermont plans to use $2.4 million from the settlement to help balance its budget,” the AP continues. It also reports that about 10 percent of Maryland’s $62.5 million payment will be freed up for the governor and legislature to spend as they wish. 

In Wisconsin, ”Governor Scott Walker wants to use $26 million to plug a state budget hole because the foreclosure crisis had a ‘direct impact on the economy,’ ” according to the AP. While state officials from both parties have sought to redirect settlement money, the idea has been criticized in a number of states, and some attorneys general — who must sign off on how the money is spent — have said they will not allow it to be used for non-housing purposes.

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