States used mortgage settlements for other purposes
WASHINGTON (MCT) — Instead of helping homeowners, states used at least $1 billion of the $2.5 billion they received in a legal settlement with major mortgage lenders to plug budget holes, pay for pet projects or promote economic development.
The $2.5 billion is in addition to an estimated $51 billion in relief that Bank of America, Citigroup, JPMorgan Chase, Wells Fargo and Ally Financial (formerly GMAC) will provide to homeowners to settle states’ charges that lenders were using improper mortgage practices. Those included “robo-signing” documents in foreclosure proceedings that resulted in widespread errors that pushed some people out of their homes unnecessarily.
States have no role in providing the $51 billion in relief to homeowners. But states do have wide discretion over the additional $2.5 billion, which was intended to ameliorate the housing crisis.
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