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California governor Brown misdirects federal housing funds

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State use of homeowner fund not the norm

Andrew S. Ross, Chronicle Columnist

Published 4:57 p.m., Thursday, October 18, 2012

When it came time to dole out the $26 billion to compensate homeowners for mortgage abuses perpetrated on them over the years, California was pretty good at the getting. But it hasn't been so good at the giving.

Of the $410.6 million in direct payments designated to help mitigate the damage done in the Golden State, very little is going to where it was intended. Instead, it's helping to plug Gov. Jerry Brown's budget hole.

According to a report released Thursday, California is one of nine states that has devoted minimal amounts of the $2.5 billion set aside nationally in the settlement for foreclosure prevention, antifraud measures, legal aid, counseling and other relief programs.

On the other hand, 23 states are using all or most of the money for such services, while some governors in hard-pressed states, like South Carolina, fought legislators' attempts to use the money for more general purposes.

In California, Brown announced the switch in his May budget revise, which sought to cover the unanticipated $15.7 billion deficit. Most of it went to service housing bond debt, with $118 million "reserved for similar uses in 2013-14."

"We're looking for the money where we can find it," Brown said at the time.

Attorney General Kamala Harris, who fought hard for the nationwide settlement, was not happy. "While the state is undeniably facing a difficult budget gap, these funds should be used to help Californians stay in their homes," she said.

Harris's office said on Thursday that $18.5 million of the direct payments allocated to California are going for various settlement-related services, including the tracking of how the five major banks are spending the rest of the money due to California as part of the national settlement.

"We're using the balance to fund the California Monitor program, dedicated to ensuring that lenders keep their commitments to homeowners, and to support legal services and housing counseling for homeowners," said spokesman Shum Preston. "California homeowners are guaranteed to receive $12 billion in principal reduction for their loans under the commitment, and estimated to receive nearly $18 billion in total benefits."

All well and good, says Andrew Jakabovics, co-author of the report published by Enterprise Community Partners, a housing nonprofit in Columbia, Md. "I'm sensitive to the fact that the state faces a major budget shortfall, but given the very specific uses of the money detailed in the settlement, it's hard to argue that the governor was right to reallocate the funds.

"The direct payments were intended to repair some of the harm done. It is wrong to have treated the money as if the state had won the lottery."

Edited by Bad_Daddy


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