COLUMBIA — South Carolina was given $31 million from a lawsuit settlement to help homeowners who can’t pay their mortgages, but the majority of lawmakers want to spend the cash elsewhere.
Among other things, the GOP-controlled Legislature wants to use the infusion to recruit new businesses.
The money in question is the state’s portion of a settlement involving five of the country’s largest loan providers to resolve state and federal investigations into illegal foreclosure practices.
Democrats in the state House and Senate have argued more of the cash should go to help the families who were hit hard in the foreclosure crisis.
“We’ve got their money, and we don’t want to return it back to them,” said Sen. John Scott, D-Columbia. “There’s something wrong with that kind of attitude when the rest of the time you say you want to give money back to the taxpayers.”
Republicans argue bringing new business to the Palmetto State will help those struggling to make house payments.
Anderson GOP Rep. Brian White, the chairman of the House Ways and Means Committee that designed the House budget, said the House didn’t neglect homeowners when it set aside the settlement money for business incentives.
“Our thought process was that the Commerce Department would be able to recruit and get people out working,” he said. “You get people employed, that’s a house payment and a paycheck.”
White said there are also lots of federal programs and agencies already assisting homeowners facing foreclosure.
The diversion of the funds is legal, the product of broad language in the $25 billion settlement that effectively gives states wide discretion to use the funds as they please.
More than a dozen states are diverting the money. But only a handful intend to spend essentially none of the funds for housing, according to a recent report by Enterprise Community Partners, a national group that advocates for affordable housing.
In its version of the budget, the S.C. House sent the bulk of the state’s settlement money to the Commerce Department’s Closing Fund, incentives used to entice companies to come to South Carolina.
The Senate’s budget that sits one vote away from approval moves $10 million from the settlement to the Commerce fund, but sets aside $5 million for the S.C. Housing Authority.
The agency would use the money primarily for legal services for families facing foreclosure and multifamily housing bonds.
The remaining balance of the settlement was put into the general fund in the Senate’s budget.
Sue Berkowitz, the director of the S.C. Appleseed Legal Justice Center, said the group was disappointed the House budget diverted all of the settlement money.
The center is asking senators to provide more of the settlement money to homeowners beyond the $5 million already in the budget.
“If you look at the intent of the mortgage settlement, the whole reason the lawsuit was initiated was because the banks were breaking the law and taking people’s homes,” she said.
While not reaching the highs experienced during the housing crisis four years ago, foreclosures are on the rise in the Lowcountry.
During the first three months of the year, the Charleston metro area’s home foreclosure rate jumped 8.5 percent from a year ago, according to online marketer RealtyTrac.
Language in the settlement gave state attorneys general, including S.C. Attorney General Alan Wilson, sole discretion over the $2.5 billion in direct payments to states included in the agreement.
Wilson wanted the money to be spent primarily on a consumer protection enforcement fund, a consumer education fund and consumer restitution.
Wilson however doesn’t control the state budget, and lawmakers didn’t go along with his plan.
According to Wilson’s office, the state received an additional approximately $16 million from the settlement beyond the $31 million in the form of direct reimbursements to borrowers.
That money will be doled out to people who have already had their homes foreclosed on.