Some of the money from the $25 billion settlement with five of the nation’s largest mortgage lenders will never go to help victims of the mortgage crisis. Instead, some of those funds will be channeled directly to state governments to offset their annual budget shortfalls, much in the same way money from the 1998 Tobacco Master Settlement Agreement goes directly into the budget of many states, including Rhode Island.
In the Ocean State, however, it appears that the $172 million allotted as the state’s portion of the settlement will go directly to those who were casualties of poor mortgage practices.
“I have seen a number of states indicate the desire to use the money they are expected to receive to fill budget gaps,” said Amy Kempe, spokesperson for Attorney General Peter Kilmartin. “There has been no such attempt to do so in Rhode Island. Under the terms of the settlement, those monies must be used for homeowner-relief programs and consumer-protection programs. The attorney general will need to submit a plan for Rhode Island’s portion of those funds [$8.9 million]. He has not yet done so.
“We have seen no indication from the governor’s office or the General Assembly that the money will be put toward the general budget,” she added. A spokesman for Gov. Lincoln D. Chafee said he has no plans to try to use any of the money to fill budget gaps.
In Massachusetts, $318 million was awarded, with $46.6 million paid to the state. According to Grant Woodman, spokesperson for Attorney General Martha Coakley, the $46.6 million will be used to assist homeowners.
Of the $172 million, an estimated $152.6 million must be dedicated to principal reduction and loan-term modifications. Borrowers who lost their home to foreclosure from Jan. 1, 2008 through Dec. 31, 2011 and suffered servicing abuse qualify for $3.1 million. Refinanced loans to Rhode Island’s underwater borrowers would receive an estimated $7.3 million, and the state receives a direct payment of $8.9 million to help fund consumer protection and state foreclosure-protection efforts.