Utah government is supposed to receive $22 million from a national settlement with five big banks over abuses in the mortgage foreclosure process. Yet the state Legislature has budgeted only about $3.75 million of that money for purposes related to the claims that gave rise to the settlement. The rest it deposited in the state's general fund.
Advocates for the victims of improper foreclosures are crying foul. They have a point.
It is true that Utah homeowners will receive another $149 million in direct aid from the settlement. That money is supposed to be used to provide modified loans, including reduced principal and refinancing. Those whose loans have already been foreclosed may be eligible for $2,000 payments.
But the Legislature has taken most of the money that will go to the state government and dumped it into the common pot. The exceptions to that are $1.75 million that was appropriated to charities that help the homeless. Another $2 million is going to the Utah Attorney General's Office to hire more people to investigate and prosecute mortgage fraud and other financial fraud.
At least some of that $22 million should have been used to help people who are still wrestling with banks over foreclosures that the people who owe the banks believe are improper. There have been widespread reports in the past of customers who have been unable to contact the outfits that service their mortgages to get even basic information about their payment status and whether the holder of the loan plans to foreclose or would entertain an offer to modify the loan.
The Utah Housing Coalition asked the Legislature for funds to hire counselors to help people who believe their loans have been foreclosed improperly or who are upside down in their loans. Housing organizations have had to lay off some 19 counselors who were previously funded by economic stimulus money from the federal government. That would have been a logical use for a portion of the state's $22 million.
The foreclosure rate has tipped downward lately in Utah, but it may not stay that way. Some experts speculate that once the banks have the settlement behind them, they will accelerate the pace of foreclosures once again.
The foreclosure settlement is not free money. It amounts to damages to help right a wrong. The Legislature should have treated it that way, not as free money or a lottery prize to be spent any way the winner decides.