How Much Have We Lost?

Thursday, November 1, 2012

VA Leads the National Way Foreclosure Settlement Diversion

Sometimes I wonder why voters get so cynical about the government.  Then there are days that I join the chorus.

As a state with booming housing starts and population growth in the late 2000's Virginia was hit hard by the foreclosure crisis.  Prince William and Loudoun were hit hard.  It also hit the Route 1 Corridor.  When I knocked doors in new townhouses around Huntington in 2009, neighbors were complaining to me about people purchased claiming rental homes are primary residences, putting 10% down, and then bailing.  There have been other pockets of foreclosures along U.S. 1 as people over committed into homes they couldn't afford.

Last year, forty-nine attorneys general and the federal government announced a $25 billion settlement with five of the largest banks.  As part of that, $2.5 billion was paid to states.  The Court ordered the following regarding that money:

In Virginia. we took $66,525,233.00 and it initially went into the Attorney General's Regulatory, Consumer Advocacy, Litigation and Enforcement Revolving Trust Fund.   You can read the court order for yourself - it's pretty clear:

Each State Attorney General shall designate the uses of the funds set forth in the attached Exhibit B-1. To the extent practicable,such funds shall be used for purposes intended to avoid preventable foreclosures, to ameliorate the effects of the foreclosure crisis, to enhance law enforcement efforts to prevent and prosecute financial fraud, or unfair or deceptive acts or practices and to compensate the States for costs resulting from the alleged unlawful conduct of the Defendants. Such permissible purposes for allocation of the funds include, but are not limited to, supplementing the amounts paid to state homeowners under the Borrower Payment Fund, funding for housing counselors, state and local foreclosure assistance hotlines, state and local foreclosure mediation programs, legal assistance, housing remediation and anti-blight projects, funding for training and staffing of financial fraud or consumer protection enforcement efforts, and civil penalties. Accordingly, each Attorney General has set forth general instructions for the funds in the attached Exhibit B-2.


It was signed by the Attorney General's designee:



This happened right in the middle of our last session - basically $67 million dropped out of the sky.  However, instead of applying it as required in the Court order, the Attorney General allowed the money to be taken from his enforcement fund and put in the General Fund.  During our floor debates, House Appropriators said this money was used for "water quality improvement" mainly in Southwest Virginia - in other words, sewage plant upgrades.

Given that the foreclosure crisis was largely, but not entirely, a Northern Virginia phenomenon, I was not very pleased and twice attempted to have the monies reappropriated to the Virginia Housing Trust Fund which has never been funded since it was created.  Ultimately, $7 million was allocated to fund upon insistence by the Senate.  I wrote about that here:


Because we were in session when the money came in and most other legislatures have longer sessions, we led the way, and The Hill's Blog points out that Virginia and our Attorney General led the charge.  Nationally, only 38% of the money has been used by states for the housing related activities, 39% was put into General Funds, and 23% hasn't been allocated yet.  Georgia, South Carolina, Missouri, New Jersey and Arizona completely gave it away.  Virginia falls in with Idaho, Indiana, Maine, Mississippi, Nebraska, Utah and Wisconsin by misusing most of it. 

In total contrast, Maryland's Attorney General Doug Gansler did just the opposite.  Here's where Maryland's money went:

$8.6 million Nonprofit Housing Counselors (Not-for-profit Agencies - RFP)
$6.2 million Nonprofit Legal Aid and Assistance (Not-for-profit Agencies – RFP)
$14 million Statewide Neighborhood Stabilization (RFP)
$10 million Baltimore City - Housing Programs
$10 million Prince George's County - Housing Programs
$2.1 million Financial Fraud Prevention – Maryland Department of Labor, Licensing and Regulation (DLLR)
$2.7 million Housing-Related Civil and Criminal Enforcement – Office of the Attorney General (OAG)
$5.97 million General Fund (10% - Civil Penalty)
$59.7 Million Total

Imagine if Virginia had given $10 million to housing programs in Loudoun, Prince William, and Fairfax Counties?  When was the last time monies were earmarked like this for Northern Virginia?

Even though media in other parts of the Virginia have covered this issue (here and here), the Washington D.C. area media has been completely silent on this. 

When people whose home values, ability to own a home, retirement funds, ability to purchase a home, and quality of life have been hammered by corporate abuse see monies intended to help people picked up given away to others, it's not hard to see how people get cynical. 

Likewise, voters aren't ignorant to the bigger picture.  I already spend a ton of time talking to my constituents up here trying to explain that there are some reasons why state government really doesn't always treat them like a sugar daddy (that's what many Northern Virginians think).  They notice when Virginia's National Tobacco Settlement monies are adminstered by a body that keeps every penny of that money downstate and then when funds come in to compensate for harms that hit Northern Virginia harder than anywhere else, it gets spread around.

I'll keep fighting to make that change.

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