Hundreds of millions of dollars meant to provide a little relief to the nation’s struggling homeowners is being diverted to plug state budget gaps.The money was part of a national settlement valued at $25 billion and negotiated with five big banks over abuses in their mortgage and foreclosure processes.
The settlement, reached in February after a year of talks and intervention by the Obama administration, was the second-largest in history involving the states, trailing the tobacco industry settlement, and represented the first large-scale commitment by banks to provide direct aid to borrowers.
In Texas, $125 million went straight to the general fund. Missouri will use its $40 million to soften cuts to higher education. Indiana is spending more than half its allotment to pay energy bills for low-income families, while Virginia will use most of its $67 million to help revenue-starved local governments.