The settlement, part of a $25 billion landmark settlement reached by 49 attorneys general, includes millions of dollars to help some struggling homeowners refinance their homes and pay down their debt. But it also includes a payment of $104 million that goes directly to the state with no strings attached.
The settlement’s drafters want the funds to be used to reduce preventable foreclosures and bolster law enforcement efforts to prevent and prosecute financial fraud. That could include more legal assistance, anti-blight projects and funding for training teams that target financial fraudsters, according to the deal.
But there’s no legal requirement that the funds be spent for any particular purpose, and Georgia law lets state legislators determine how it’s doled out.
Attorney General Sam Olens said he drafted a letter to legislators stressing that the funds should be used to buffer the effects of the foreclosure crisis, but said he has little say in where the money will go.
“It’s up to the Legislature,” he said.
So far, legislative leaders have had only preliminary discussions over their plans.
House Speaker David Ralston’s spokesman Marshall Guest said the chamber’s leaders haven’t decided yet how to use the money. Top Senate Republicans want to put the money in reserves for now and have no specific long-term plans for the funds, said Nathan Humphrey, the chief of staff to state Senate President Pro Tempore Tommie Williams.
The settlement, which is valued at $814.7 million, includes about $102 million to refinance loans to some underwater borrowers and another $526 million to benefit loan term modifications. Olens said the settlement should provide “partial relief” to Georgia homeowners, although he was disappointed it didn’t extend to mortgages issued by Fannie Mae and Freddie Mac, which own half of all U.S. mortgages.
Olens is urging lawmakers to devote some of the money to fund a new effort to prosecute mortgage abuse in Georgia, which is home to more bank failures during the financial crisis than any other state. But that’s where he runs into another roadblock: His office doesn’t have much authority to probe those crimes.
He’s backing a measure, introduced by state Rep. Rich Golick, which would give the attorney general’s office and local prosecutors the authority for the first time to issue subpoenas to investigate fraudulent real estate transactions. The measure passed the House last year but was bottled up in the Senate. Golick said he’s hopeful a version of his proposal will be adopted this year.
“The main thing is to put teeth in the law to prevent abusive practices in foreclosures,” said Golick, a Smyrna Republican. “My hope is that law enforcement will have the investigative tools necessary to go ahead and conduct investigations.”