A response from Beebe on mortgage money | Arkansas Blog

Monday, February 13, 2012

A response from Beebe on mortgage money

Posted By on Mon, Feb 13, 2012 at 9:54 AM

I asked some questions Friday evening of Gov. Mike Beebe and Attorney General Dustin McDaniel's office relative to McDaniel's unilateral spending of some $13 million from a nationwide settlement with major banks over foreclosure practices.

No response from McDaniel to that list of questions.

Beebe's spokesman Matt DeCample responded today:

To answer your inquiry from Friday night, no, McDaniel did not consult with the governor on distribution of the settlement funds. His office did keep our office up to date on the negotiations as they developed.

Under current law, the AG is the one with the authority to determine how settlement monies are spent.

As AG, Governor Beebe worked to handle settlement money by the cy-pres doctrine, keeping money close to the subject of the lawsuit and settlement as much as possible. It appears that AG McDaniel’s published policy has similar goals.

Under current law, the a.g. indeed is calling the shots on spending of lawsuit settlement money. Is this constitutional? That's still an open question, I think, resting so far on the shaky precedent of a single, not wholly related case that's more than 60 years old. Did all of the spending outlined by McDaniel (and it wasn't very specific) generally relate to the subject of the lawsuit? Well, it's better than when McDaniel took a drug settlement and sent it to the State Police Foundation to build a building at the state cops' shooting range (a use not mentioned in the court order on the settlement). But the $9 million in unspecified money sent to the Arkansas Development Financing Authority, including for "economic development"? That remains to be seen.

UPDATE: More from McDaniel's PR agent, Blake Rutherford:

As you may not be aware, ADFA oversees the largest number of housing programs of any Arkansas state agency. That said, in your recent blog post you made reference again to “economic development,” which you noticed in our release. I wanted to clarify for you what we believe that to mean, and it how it would be implemented.

Consider, for example, the notion of housing generally. The foreclosure crisis had a substantial impact on home prices. According to Atif Mian, Amir Sufi and Francesco Trebbi, “Our estimates suggest that foreclosures were responsible for 15% to 30% of the decline in residential investment from 2007 to 2009 . . .” See Mian, Sufi, and Trebbi, “Foreclosures, House Prices, and the Real Economy” (2011). Data also tells us that the impact of the recession and the ongoing foreclosure crisis has had a disproportionate effect on minority groups, notably African-Americans and Hispanics. See Jacob S. Rugh and Douglas S. Massey, “Racial Segregation and the Foreclosure Crisis” in American Sociological Review (2010). Economic data available to us suggests that every dollar invested in housing generates $7 in additional economic activity, including jobs. See Center for Community Change Report (2011) (quoting Ken Smith, Executive Director of the Delaware Housing Coalition). Therefore, we see using this money to amplify successful housing programs administered through ADFA as ultimately having a positive effect on economic development on the state as a whole in addition to assistance that many Arkansans will receive through loan modification, principal reduction, and direct payments.

So how would that be accomplished? Working together, the Arkansas Development Finance Authority and the AGs office have identified several programs that would help fulfill the mission of the settlement. Those programs include:

* Low-interest financing for qualifying low-income purchasers of single-family housing;

* Down payment assistance which provides funds for down payment and closing costs, typically for use by first-time homebuyers;

* Housing, financial literacy, and foreclosure counseling to offer counseling on housing finance, purchasing a home, and maintaining ownership of affordable housing; and

* The Arkansas Housing Trust Fund (Act 661 of the 2009 session), which is a component of ADFA, and has the ability to work in a number of areas including to “revitalize distressed neighborhoods and build healthy, vibrant communities by developing high-quality affordable housing” and to engage in “housing and foreclosing counseling.”

Your characterization that these funds are going to rest in an “economic development slush fund” is wholly inaccurate. Again, these funds will be directed to specific programs that have a nexus to the issues in this case, like those referenced above. ADFA and its Board will continue to administer these funds and programs with complete transparency, as they currently do. No funds have been transferred to the states, and, as I indicated to you previously, we intend to make everyone aware of the programs and allocations once they are determined.

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