Needy States Use Housing Aid Cash to Plug Budgets

As the funds from a $25 billion nationwide settlement over foreclosure abuses are distributed to individual states, money set aside specifically to help distressed home owners is instead being rerouted into depleted state coffers.

Only 27 states have directed 100 percent of their funding into housing programs, reports Enterprise Community Partners. About 15, with California being the latest, have announced that the settlement money will be used in part or completely for other purposes, ranging from economic development to debt reduction.

U.S. Housing and Urban Development Secretary Shaun Donovan has been privately nudging state officials to use the money — $2.5 billion total — as it was intended. “Other uses fail to capitalize on the opportunities presented by the settlement to bring real, concerted relief to homeowners and the communities in which they live,” he said.

Alan Jenkins of the Opportunity Agenda, which supports home ownership, goes so far as to suggest that redirecting the settlement funds could even have a racially discriminatory effect in some states. “If you dump all of these funds into the general coffers,” he explains, “the African-American home owners are not going to benefit in any real way because they represent such a small percentage of the larger state.”

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