The drafters of the settlement urged - but didn't require - the states to use the cash toward activities that could help avoid "preventable foreclosures" and "ameliorate the effects of the foreclosure crisis."
Georgia received approximately $815 million - $700 million of which will pay for debt relief to distressed homeowners.
Gov. Nathan Deal and the General Assembly, however, decided to earmark the remaining $99 million or so for economic development programs. Kate Little of the Georgia State Trade Association of Nonprofit Developers recently pointed out in a column for the Saporta Report why dividing the money between the Regional Economic Business Assistance, or REBA, and the OneGeorgia Authority was a bad idea:
In announcing his plans for allocating the [settlement] funds, Gov. Deal said that the money would be better in supporting jobs to impact the economy, rather than addressing the foreclosure crisis.
However, since the metro area also has been recognized as the economic engine for the state, one could reasonably assume that some of the settlement dollars would make their way here and have an indirect impact on the number of foreclosures.
But then, one would be wrong. Both REBA and the OneGeorgia Authority will use the funds to attract jobs to rural Georgia. The metro Atlanta area will no benefit from this infusion of dollars into the state, even though the amount of funds the state received was calculated in part on the number of foreclosures in here.
According to its website, REBA can offer incentives to companies to close deals or finance company's "fixed-asset needs" such as "infrastructure, real estate acquisition, construction, or machinery and equipment."
Fast forward to Thursday, when Congressmen John Lewis, David Scott, and Hank Johnson, all of whom represent metro Atlanta districts that have been walloped by the mortgage crisis, sent a letter to Deal urging him to redirect that cash to programs that could prevent foreclosures. (We argued as much back in February.)
It reads, in part:
"It is our belief that the most appropriate use of resources to meet the description in the Consent Judgments would begin with housing counseling services and legal aid. We hope that every effort is made to fund such activities. Additionally, we request that any settlement resources released by your agencies directly assist those communities that were disproportionately affected by the servicers' misconduct. To that end, we also request information detailing the process for this money's allocation and information on every recipient. Using this money for any other purpose other than helping homeowners directly we believe violates the spirit, if not the letter, of the settlement agreement and misses an opportunity to address one of our state's most severe economic burdens."
"Funny they don't mention that $700 million of the settlement is going directly to homeowners," Deal spokesman Brian Robinson said in an email to CL when asked for comment. "I'm sure it was just an oversight. The rest is going to create jobs. They best way to halt Georgia foreclosures is to help those who've suffered in this economy to find work."
That's one way of looking at it. But it takes time to for companies to relocate, set up shop, and to start making widgets. Job creation doesn't happen overnight. Meanwhile, the aftershocks of the mortgage fiasco are still being felt. (We said the same in a reply to Robinson, along with asking if any of the $104 million would be earmarked for economic development projects in metro Atlanta. We will gladly update when we hear back.)
UPDATE, 3:27 p.m. Robinson adds via email:
Again, $700 million is going direct to homeowners facing foreclosure. And that's just ONE pot of money. There are other programs to protect homeowners, such as the Hardest Hit Fund and one that helps veterans returning home who've hit hard times. I'm sure there are others that I don't even know about.
The $99 million (it's not 104) will go into two funds, REBA and One Georgia. REBA will receive 60 percent, and One Georgia will receive 40 percent. REBA is geared toward metro counties that are already more developed. One Georgia is less flexible, in that it can only go toward rural, undeveloped counties. The foreclosure problem exists in every community in Georgia, not just in metro Atlanta.
It's absurd to suggest that because we're using $99 million to create jobs that leaves no money for people facing foreclosure. For the record, South Carolina is using its discretionary money for the exact same purpose. What are the fine congressmen going to say when we lose the next Caterpillar to South Carolina because it has millions more in closing money than we do? This pot of money is a game changer for our economic development needs.
Also mentioned in the letter: a second settlement between attorneys general and smaller banks is currently in the works. The congressmen "strongly encourage" Deal to use any direct payment that comes to Georgia as a result of that settlement for "foreclosure remediation" and "recovery activities."
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