Virginia legislature spends foreclosure settlement on non-housing items

Attorney-General Cuccinelli briefs the State Senate Finance Committee on the settlement funds

Virginia received a direct, one-time payment of $69 million from the National Mortgage Settlement Agreement. This money should have been used to benefit the Virginians struggling through the weak housing market. Virginia is ranked 8th in the nation for underwater homeowners. Virginians have lost billions of dollars in equity in their homes, rents are rising faster than incomes, foreclosures are hollowing out our neighborhoods, and homelessness is on the rise for the first time in a decade.  Instead of addressing these critical needs, the Virginia General Assembly wasted this one-time opportunity by using the money to fill holes in the budget.

Economists, business leaders, and policy makers all agree that re-starting the housing market is essential to our economic recovery. The money from the National Mortgage Settlement Agreement should have been spent as it was intended, to rebuild home ownership and help Virginians who have been devastated by the housing crisis. Examples of how this $69 million should have been used in Virginia include:

  • Down payment assistance for first time home buyers
  • Housing counseling for new homeowners and foreclosure prevention
  • Rehabilitation of vacant & abandoned properties
  • Development of affordable housing
  • Preventing homelessness through rapid re-housing

Invested in this way, the money would have helped absorb the current oversupply of housing. We know that programs such as down payment assistance can help credit worthy borrowers afford their first homes. Housing counseling for first time home buyers and foreclosure prevention are highly effective and much needed in Virginia. Support for localities, non-profits, and housing authorities to purchase, rehabilitate and rent foreclosed homes would not only have helped reduce inventory, but also would have addressed growing problems with neighborhood blight and vacancies.

This $69 million payment could have made an enormous difference if it had been intelligently invested to improve the housing market. Rebuilding home ownership among low and moderate- income Virginians would have promoted economic growth. Virginia will never again have this opportunity to address families in need, who have lost unprecedented amounts of money in this housing crisis. Using the one-time payment from the National Mortgage Settlement Agreement to fill routine and unrelated holes in the budget is the wrong decision. Targeted investment in housing is what Virginians need and deserve from this money.

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