Despite a multi-billion-dollar windfall seen by the federal government and nearly all 50 states as the result of the landmark mortgage servicing settlement in early 2012, the funds are not sufficiently supporting state housing programs as initially intended, a recent report finds.
Funds resulting from a settlement totaling more than $25 billion were intended to go in part to prevent foreclosures, stabilize communities and prevent and prosecute financial fraud. However, those initiatives are not being met fully, according to Enterprise Community Partners.
“The District of Columbia and the 49 states who were parties to the settlement have been allocating and distributing their respective shares of the $2.5 billion that was designated for them, but less than half of the announced expenditures will be used as intended,” the report states.
Instead, the vast majority of funds are going to states’ general funds. The report outlines spending by state indicating that some states are using their funds for housing, while others, such as California, have designated nearly all of the funds as civil penalties and to service the state’s housing debt.
A near $1 billion for the Federal Housing Administration greatly reduced the likelihood the agency would need a federal bailout, its leadership announced in February.
Written by Elizabeth Ecker