Found via the Corner of Berkshire & Fairfax.
The U.S. housing market is showing tentative signs of life as demand for new homes and housing prices begin to rise in some areas.
Yet pitfalls remain, including about 12 million borrowers who still owe more on their “underwater” mortgages than their homes are worth. To help some of those people, the recent $25 billion national mortgage settlement required five large banks to pay states $2.5 billion for foreclosure prevention and other housing-related efforts.
Here’s the problem: many states -- including some hardest hit by the housing bust -- are diverting more than $1 billion of that settlement money to fill budget gaps, fund public universities and even bankroll litigation against defective Chinese drywall, according to a Bloomberg Government report. In doing so, states are robbing troubled borrowers of assistance and jeopardizing their housing recoveries in the process.