Sunday, December 28, 2014

State should use mortgage settlement for homeowners

A DN editorial:

State should use mortgage settlement for homeowners

A DN editorial:

THE GOOD NEWS: Pennsylvania is due to receive about $69 million as a result of last week's federal settlement with big banks over improper foreclosures that were based on robo-signing and bad paperwork.

We have a sinking feeling about this settlement, though, since Pennsylvania could divert that money into the general fund instead of where it's supposed to go: to help struggling homeowners avoid or deal with foreclosure.

Already, two states - Wisconsin and Missouri - have announced plans to plug holes in their state budgets with the settlement money instead of helping homeowners directly.

And given Gov. Corbett's budget address earlier this month, with state revenue falling short of projections by $500 million, we fear that this mortgage money will be grabbed as an easy way to cope with that shortfall.

Our fears are not unfounded: a similar multistate settlement with tobacco companies in 1998 brought huge payments to the state that were supposed to be earmarked for health. That settlement led to the creation of the adultBasic program providing health coverage to those not qualified for Medicaid.

Last year, Corbett killed the adultBasic program and proposed folding tobacco-settlement money into the general fund; that proposal was never executed.

Auditor General Jack Wagner reported that the General Assembly has diverted $1.34 billion of that money since 1999; then-Gov. Ed Rendell diverted $432 million to the general fund and $121 million for pension obligations for public-school employees.

The double shame if this mortgage-settlement money gets sucked into the general budget is not just that struggling homeowners will continue to struggle but that Pennsylvania was once an innovator in helping homeowners avoid foreclosure. The Homeowner Emergency Mortgage Assistance Program (HEMAP) was created during 1983's recession, and granted loans to homeowners who were in danger of foreclosure because of circumstances beyond their control, like a lost job. According to a recent report by the Reinvestment Fund, HEMAP loans saved more than 42,700 families from foreclosure. According to the report, "Were it not for HEMAP, not only would Pennsylvania's annual foreclosure rates have been higher, but our rank among states would have been several positions higher ... "

Last year, funding cuts from the state forced a shutdown of HEMAP. Now, consumer advocates rightly point out that the mortgage-settlement money should go to reinstituting this program.

Let's remember that the latest settlement is based on thousands of homeowners victimized by banks, which foreclosed on properties they had no right to foreclose on. The state shouldn't victimize these homeowners again by taking the money intended to help them.

Follow us on Twitter and review city services on our sister site, City Howl.

About this blog
Every year, city government spends slightly more than $4 billion. Where does all that money come from? More importantly, where does it go? Are we getting the most bang for our tax buck? “It's Our Money” is a joint project between Philadelphia Daily News and WHYY, funded by the William Penn Foundation, designed to answer these questions.

It's Our Money contributors

Tips? Comments? Questions?
Contact:

Holly Otterbein:
215-854-5809
hm.otterbein@gmail.com
@hollyotterbein

It's Our Money
Also on Philly.com
Stay Connected