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AG Says State Shouldn’t Use Mortgage Settlement Money For Unrelated Programs

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George Jepsen (Courtesy Office of the Attorney General)

George Jepsen (Courtesy Office of the Attorney General)

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^By STEPHEN SINGER= ^Associated Press=
HARTFORD, Conn. (AP) _ Attorney General George Jepsen told state lawmakers Tuesday that a national settlement for mortgage abuses has established needed reforms, but he asked that they use millions from the deal to help struggling homeowners and not spend the money on unrelated government programs.

The $25 billion settlement that Jepsen helped negotiate includes about $120 million for thousands of Connecticut homeowners and $27 million to the state for mortgage relief or counseling.

Jepsen said he looks forward to working with lawmakers and Gov. Dannel P. Malloy “to ensure that these funds are used to provide additional help to Connecticut’s borrowers.”

Rep. Patricia Widlitz, the House chairwoman of the Finance, Revenue and Bonding Committee, said in an interview that the money should be earmarked for borrowers. But she noted that the money “could be tempting” for state government as it seeks revenue.

“There’s always pressure. That’s to be expected,” she said.

Lawmakers and previous governors, seeking money to plug budget holes, drew criticism from advocates for reaching into funds set aside to promote energy efficiency and clean energy.

The landmark $25 billion settlement with the nation’s top mortgage lenders, announced earlier this month, was hailed by government officials as long-overdue relief for victims of foreclosure abuses. But consumer advocates countered that far too few people will benefit.

The deal will reduce loans for only a fraction of those Americans who owe more than their homes are worth. It will also send checks to others who were improperly foreclosed upon. But the amounts are modest.

Nationally, about 11 million households owe more on their mortgages than their homes are worth. The settlement would help 1 million of them.

In Connecticut, the settlement provides homeowners who lost their houses over the last four years with cash payments of about $1,500 for the “unfair treatment” by banks, Jepsen said. Some 7,500 people in Connecticut are expected to be eligible for these payments, he said, adding that the money is modest for the loss of a home.

Rep. William Tong, the House chairman of the Banks Committee, said he wonders if consumers will truly benefit.

“A lot of us are wondering: Is this a good deal?” he asked Jepsen.

The attorney general said the settlement takes a small step in resolving what he said is $700 billion in “underwater mortgages,” or loans that are greater than the home’s value.

The settlement does not address that $700 billion, he said. “It addresses what’s available to us.”

“While I am as frustrated and angry as anyone else with the banks and the problems they have caused, that frustration and anger does not change the law nor what the law allows my office to win in court,” Jepsen said.
Congress, President Barack Obama and state legislatures must change federal and state law governing how banks operate, he said.

(Copyright 2012 by The Associated Press.  All Rights Reserved.)

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