The U.S. Department of Housing and Urban Development (HUD) was revealed to have engaged in a secret spat with the state government of Wisconsin regarding the latter's allocation of its $30.2 million cash payout from the National Mortgage Settlement.
The Milwaukee Journal-Sentinel has obtained a copy of a May 4 letter from HUD Secretary Shaun Donovan to Wisconsin Gov. Scott Walker, in which Donovan expressed his displeasure that the funds were not being set aside to help distressed homeowners or victims of wrongful foreclosure. Wisconsin allocated $24.3 million from the settlement to plug the budget gap, while another $1.3 million went to fund pay raises and bonuses for prosecutors.
‘I am concerned about other reports indicating that the funds will be used to close state budget gaps unrelated to housing,’ Donovan wrote. ‘While ultimate allocation of these funds is up to you and other state officials, I would urge you to use this settlement payment to support direct homeowner assistance that can help ensure that Wisconsin homeowners can take advantage of every opportunity to avoid foreclosure and prevent the blight associated with foreclosure from hurting their neighbors and community.’
Walker responded to Donovan in a May 31 letter, defending the state's action.
‘Using a small portion of the settlement proceeds for the general fund is an acknowledgment that the housing crisis has impacted all Wisconsin citizens,’ Walker wrote.