Part of Georgia’s foreclosure fraud settlement may be diverted

Five major mortgage lenders recently reached a $25 billion foreclosure fraud claims settlement with a committee of attorneys general from several states. Georgia Attorney General Sam Olens was not a member of that committee but accepted the deal nonetheless. Although Georgia’s share of the settlement will total $815 million, more than $100 million of that money may not be used to benefit the state’s struggling homeowners or victims of foreclosure fraud.

This is because the settlement agreement also provides that the lenders pay a portion of the money directly to state governments so that states can develop their own programs. Georgia is expected to receive $104 million of its $815 million total as a direct payment. Unfortunately, the state’s constitution requires that this money be put in the state treasury, which means that it can and most likely will be used for other purposes.

Is this fair? With average home sales prices in the Atlanta area at or near record lows and as many as one-third of the state’s homeowners underwater on their mortgages — many neighborhood organizations, homebuilders and advocates for defrauded homeowners say no and have asked state legislators to use the $104 million to benefit victims of foreclosure fraud and distressed homeowners.

A spokesman for Gov. Nathan Deal said the governor is open to the possibility of using the money to help victims of foreclosure fraud but will also have to weigh that need against others, including “the needs for teachers, law enforcement officers and building transportation infrastructure.”

Source: The Atlanta Journal-Constitution, “Funds for defrauded homeowners diverted by state,” Christopher Quinn, March 11, 2012