Foreclosed-upon homeowners who thought their state governments would deliver on promises to help victims of alleged foreclosure abuse may not get their bailout. As The New York Times reports, funds from the settlement between state attorneys general and five banks that the AGs claimed would deliver "as much as $25 billion in relief to distressed borrowers" are going elsewhere:

The settlement, reached in February after a year of talks and intervention by the Obama administration, was the second-largest in history involving the states, trailing the tobacco industry settlement, and represented the first large-scale commitment by banks to provide direct aid to borrowers.

As part of the settlement, the banks agreed to pay the states $2.5 billion, money intended to help homeowners and mitigate the effects of the foreclosure surge. …

Only 27 states have devoted all their funds from the banks to housing programs, according to a report by Enterprise Community Partners, a national affordable housing group. So far about 15 states have said they will use all or most of the money for other purposes.

Gov. Jerry Brown is proposing redirecting the $410 million California is expecting in his revised budget released this week. Where is the money going to?

  • $41.1 million to the Unfair Competition Law Fund to offset costs of California Department of Justice programs
  • $49.9 million the Department of Justice’s Public Rights and Law Enforcement programs for consumer fraud enforcement and litigation
  • $8.2 million to the Department of Fair Employment and Housing to fight housing discrimination
  • $198 million in debt service for housing programs passed by initiatives unrelated to the foreclosure crisis
  • The rest will be rolled over to pay similar expenses in next year's budget

So Brown is proposing paying for the state’s own lawyers so they can sue more people in the future rather than the already extant victims of any sort of foreclosure abuse. How … nice for them. It’s like the outcome of a class action lawsuit.

But Brown lacks the nerve of Republican Georgia Governor Nathan Deal, who wants to use the $99 million as a slush development fund to lure new businesses to the state:

“The governor has decided to use the discretionary money for economic development,” said a spokesman for Nathan Deal, Georgia’s governor, a Republican. “He believes that the best way to prevent foreclosures amongst honest homeowners who have experienced hard times is to create jobs here in our state.”

Andy Schneggenburger, the executive director of the Atlanta Housing Association of Neighborhood-Based Developers, said the decision showed “a real lack of comprehension of the depths of the foreclosure problem.”

How could Deal's plan possibly go wrong?