EDITORIAL: Bondi struck bad deal on $200 million from mortgage fraud settlement

November 11, 2012 | Palm Beach Post

Attorney General Pam Bondi assured Floridians that $300 million from a national mortgage settlement would go to distressed homeowners. She can’t keep that promise, though, because she’s given the Florida Legislature control over most of the money.

Ms. Bondi just agreed to get $60 million to homeowners right away. At next month’s meeting of the Legislative Budget Commission, she will seek amendments to disburse the money for down payments and foreclosure-related legal assistance. Ms. Bondi designated $40 million as civil penalties, but gave the Legislature power to appropriate the remaining $200 million.

Florida is one of 49 states to share a $25 billion settlement with the nation’s five largest banks over allegations of foreclosure fraud. The attorneys general of each state and federal regulators negotiated the deal. Florida homeowners will get $7.5 billion directly from the lenders. The attorneys general divided another $2.5 billion in direct aid, based on the size of their states and how hard they were hit by the foreclosure crisis.

Florida’s $300 million is intended to help prevent foreclosures, stabilize communities and prevent or prosecute financial fraud. The deal Ms. Bondi struck with incoming Senate President Don Gaetz, R-Niceville and House Speaker-designate Will Weatherford, R-Wesley Chapel, calls for the legislature to “support the appropriation” of the $200 million for housing-related programs.

In recent years, the Legislature has balanced the state budget by raiding trust funds — money designated for specific purposes. What’s to stop legislators from grabbing the $200 million Ms. Bondi just gifted?

“The devil’s in the details, and we’re going to be monitoring and watching how the Florida Legislature ends up appropriating it,” said Trey Price, public policy representative for the Florida Association of Realtors. “I think this was an important first step, that the legislative leadership and the attorney general have generally agreed the money will be spent on housing, but there’s more detail that needs to be worked out…other states have just kind of sunk the money into general revenue and made up for budget deficits.”

Indeed. A report by Enterprise Community Partners, a housing nonprofit, found that states have diverted more than half of the mortgage settlement money — $988 million so far — to their general funds or for other non-housing uses. California Attorney General Kamala Harris, a key figure in the negotiations with banks, lost a fight with Gov. Jerry Brown over how the state would spend its direct aid.

he $360 million that was supposed to pay for housing counseling, legal aid, consumer financial protection investigations and other programs related to the foreclosure crisis went toward the state’s $15.7 billion budget deficit.

Ms. Bondi said in a statement that her agreement with lawmakers “ensures that the settlement funds are spent with the transparency, accountability and flexibility that comes from the legislative process.” Transparency? This the Legislature that slipped prison privatization into budget fine print so it would escape debate. The courts ruled the move illegal.

A spokesman said that while Sen. Gaetz wants the money to go to housing programs, “ultimately the decision would be left up to the individual members” of the Senate. The same goes for the House. Nothing would help Florida’s economy more than an improved real estate market. That’s where the $200 million should go. Yet Ms. Bondi as left homeowners and would-be homeowners at the mercy of the Legislature.