Wisconsin to use part of national mortgage settlement for budget hole

  • Article by: Associated Press
  • Updated: February 10, 2012 - 9:09 AM

MADISON, Wis. - Wisconsin plans to use about $26 million of its $140 million share of a national mortgage settlement to help plug a state budget hole, a move that drew criticism from Milwaukee's mayor.

Attorney General J.B. Van Hollen's office made the decision in consultation with Gov. Scott Walker, and they announced their plan Thursday.

The rest of Wisconsin's share of the $25 billion national settlement will go toward helping homeowners who were affected by foreclosure abuses between 2008 and 2011.

Walker told a news conference that just like communities and individuals affected by the foreclosure crisis, the state has also been harmed and the payment will go toward offsetting that. Walker has previously been critical of using so-called "one-time" money from legal settlements to balance the state budget.

He defended his own use of this settlement money Thursday by saying that this time it was different since the foreclosure crisis had a "direct impact on the economy."

But Milwaukee Mayor Tom Barrett said in a story published Friday by the Milwaukee Journal Sentinel ( http://tiny.cc/r18r1) that "not one dime should be used to fund the unbalanced state budget."

A new projection released Thursday shows the state faces a $143 million budget shortfall by July 2013. Walker said his administration would plug the hole without the need to pass an emergency budget bill.

Barrett, a Democrat, is considering running against Walker, a Republican, in a possible recall election. Barrett lost to Walker in the 2010 governor's race.

Barrett said all of the $31.6 million coming to the state instead of directly to homeowners should be used for foreclosure mitigation programs in Milwaukee, a city that has had more foreclosures than any other in Wisconsin.

"The worst thing that can happen now is for the state of Wisconsin to employ its own bait-and-switch," Barrett said.

Van Hollen, a Republican, said Barrett was wrong to focus on just that one piece of the $140 million payment.

"The overwhelming majority of that $140 million is going to go to Milwaukee, is going to be able to help homeowners who are in trouble in Milwaukee, reimbursing homeowners who were foreclosed upon and shouldn't have been, preventing or remediating blight and creating jobs," Van Hollen said.

Wisconsin's share of the proposed settlement includes:

_ Up to $60 million in benefits from loan term modifications and other direct relief for homeowners.

_ About $17.2 million in uniform payments of up to $2,000 for eligible Wisconsin borrowers who lost their home to foreclosure from Jan. 1, 2008, through Dec. 31, 2011, and who sustained servicing abuses.

_ About $31.3 million in refinancing benefits for eligible borrowers who are making payments but owe more than their home is worth.

The money is coming from Bank of America, J.P. Morgan Chase, Citigroup, Residential Capital and Wells Fargo & Co.

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