The settlement, between five of the country’s biggest banks and an alliance of almost all states and the federal government, resolved allegations that the banks deceived homeowners and broke laws when pursuing foreclosure.
Every state got a portion of this multi-billion dollar settlement that was supposed to be used for housing. Unfortunately, there was no limitation on how this money could be spent, and many states wasted the opportunity to fix the housing crisis and rebuild homeownership. This is a wasted opportunity because the weak housing market continues to be a drag on our economy and prevents robust job growth. Some smart uses of the money include Ohio using $75 million to reduce 100,000 abandoned homes.
Virginia chose to use most of the $66 million they received to fill budget gaps. Considering that Virginia is in the top ten in the nation for underwater homeowners, this is an unforgivable waste of once-in-a-life-time settlement funds. Better uses for this money include:
- to rebuild homeownership through down payment assistance for first time home buyers
- rehabilitation of vacant and abandoned properties
- house counseling for new homeowners and
- foreclosure prevention
The likelihood of Virginia receiving this much money for housing in the future is next to none. The Virginia General Assembly’s decision to use one-time money to fill budget holes is a catastrophic failure of leadership that will hurt Virginia’s economy for years to come. Virginia only dedicated $7 million for housing. The rest of the $66 million was spent closing routine budget holes. Even this small amount was allocated only after Virginians raised their voice in opposition to the General Assembly’s plan to use the entire $66 million to fill budget holes.
Let us contrast Virginia’s use of the National Mortgage Settlement with our neighbor to the north, Maryland. The State of Maryland received $60 million from the settlement. Here is a quick summary of how they plan to spend their share:
- $8.6 million — nonprofit housing counselors (RFP)
- $6.2 million — nonprofit legal aid and assistance (RFP)
- $14 million — statewide neighborhood stabilization (RFP)
- $10 million — Baltimore City housing programs
- $10 million — Prince George’s County housing programs
- $2.1 million — financial fraud prevention, Maryland Department of Labor, Licensing and Regulation
- $2.7 million — housing-related civil and criminal enforcement Office of the Attorney General
- $5.97 million — general fund
Virginia’s leaders: our General Assembly, our Attorney General and our Governor Bob McDonnell have let us down. Attorney-General Ken Cuccinelli had the authority to specify how these funds should have been used, but he passed the buck on to the General Assembly. Governor McDonnell, who had high approval ratings in the Commonwealth, could have publicly asked the General Assembly to use this money for housing, he chose not to. This once-in-a-lifetime money could have been spent fixing the housing crisis and getting our economy moving again. Unfortunately they spent the majority of it to fill routine budget holes.