Homeowners Get Screwed Again

Homeowners can never win. The latest news is that the money from the mortgage settlement, the agreement made in good faith between the government of the United States and five of the largest lending institutions in the United States, instead of going to homeowners, is being diverted for other things. As the New York Times reported on May 16, 2012:

 Hundreds of millions of dollars meant to provide a little relief to the nation’s struggling homeowners is being diverted to plug state budget gaps.
In a budget proposed this week, California joined more than a dozen states that want to help close gaping shortfalls using money paid by the nation’s biggest banks and earmarked for foreclosure prevention, investigations of financial fraud and blunting the ill effects of the housing crisis. California was awarded more than $400 million from the banks, and Gov. Jerry Brown has proposed using the bulk of that sum to pay the state’s debts.

Jerry Brown is not the only culprit here. It is unconscionable to me that money that was negotiated to be used by the States for one purpose can be used for an entirely different purpose, no questions asked. This turns the mortgage settlement that the five leading mortgage lenders agreed to in February of this year into nothing more than a tax.

So who is screwing homeowners more--Bank of America or Jerry Brown? And Jerry Brown is not the only one. The Times provides the details:

 Only 27 states have devoted all their funds from the banks to housing programs, according to a report by Enterprise Community Partners, a national affordable housing group. So far about 15 states have said they will use all or most of the money for other purposes.

In Texas, $125 million went straight to the general fund. Missouri will use its $40 million to soften cuts to higher education. Indiana is spending more than half its allotment to pay energy bills for low-income families, while Virginia will use most of its $67 million to help revenue-starved local governments.

How insane is this? If the above information is accurate, the States are stealing the same money from homeowners that their federal counterparts were trying to recover for them. Is it so difficult to have a law that explicitly states that money that is targeted for a given purpose needs to be spent in the manner for which it was intended?

But why would politicians agree to such a law? All they would be doing, from their perspective, is limiting their own flexibility. This reminds me so much of the line item veto that Ronald Reagan was so passionate about during his presidency. If politician A votes against popular legislation because s/he opposes unrelated legislation that is piggybacked onto the original bill, his or her critics will say that s/he opposes the original bill. After all, s/he voted against it! How absurd!

Is anyone else out there as outraged by this as I am?