Already, two states — Missouri and Wisconsin — have set out plans to use funds from the $26 billion foreclosure fraud settlement to balance their budgets, rather than their intended purpose of helping troubled homeowners avoid foreclosure or get out from beneath underwater mortgages. Now, Ohio is set to become the third state to divert the funds from foreclosure prevention, instead using the money to tear down old, vacant homes:
Ohio, which is receiving $97 million in its direct payment from last week’s settlement, plans to allocate $75 million to demolish vacant and dilapidated homes dragging down the values of neighboring properties, Attorney General Mike DeWine said Feb. 9.
At least 100,000 homes need to be demolished, DeWine said, and he is establishing a program to match funds that cities and land banks allocate for tearing down houses.
This is a slightly more justifiable use of the foreclosure fraud settlement money than that decided upon by Wisconsin or Missouri, as vacant homes drag down home values for entire neighborhoods, pushing homeowners further underwater, But the settlement money is supposed to aid homeowners directly, not in a roundabout way.
Plus, there is already a party responsible for the vacant homes blighting Ohio’s cities: the banks that own them. The city of Cleveland has been trying, without much success, to force banks to pay for the upkeep of foreclosed-upon homes, in order to prevent them from becoming a drag on local economies. “We would have much rather spent that money helping families and creating homes rather than knocking houses down that we believe are owned by some very well-resourced banks,” said Chris Warren, Cleveland’s chief of Regional Development, on his city’s demolition of empty homes. And now even more money that is meant to help homeowners will instead go towards literally clearing away the banks’ mess.