Major banks forked over billions of dollars in a mortgage settlement. Some states are using that money to fix any kind of budget gap.
Major banks forked over billions of dollars in a mortgage settlement. Some states are using that money to fix any kind of budget gap. - 
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Kai Ryssdal: There was a huge mortgage settlement earlier this year, February if you remember. $25 billion from five big banks going to the states to settle charges of improper foreclosures, sloppy paperwork, robosigning, lots of bad stuff.

The New York Times tells us today that most money is going to homeowners, but a not-small slice of it -- about $2.5 billion -- is being used by states to plug budget gaps.

From KCUR in Kansas City, Mo., Sylvia Maria Gross has the story.

Sylvia Maria Gross: Earlier this year, Missouri Gov. Jay Nixon proposed major cuts to higher education. So when news of the mortgage settlement broke, he promised that $40 million to state colleges and universities. And, for a change, the Democratic governor won bipartisan approval -- here's Republican budget chair Ryan Silvey.

Ryan Silvey: Happy to see the Governor's finally starting to listen to the legislature and the people of this state that are demanding that higher education not continually get eviscerated.

Joan Bray of the Consumer Council of Missouri says she's disappointed that money was diverted from homeowners.

Joan Bray: While I'm totally supportive of higher education, there are families stressed under their housing conditions, and the expectation is that there try and be some relief there.

The vast majority of the mortgage settlement money is going to homeowners. But more than a dozen states are using their portion to plug budget holes.

Amanda Roberts is at the housing organization Enterprise Community Partners. She feels this is going against the spirit of the law.

Amanda Roberts: There is language in the settlement that says to the extent practicable the funds should be used to avoid preventable foreclosures, ameliorate the foreclosure crisis, enhance law enforcement, et cetera, et cetera.

Roberts says most states are using the money to help homeowners.

In Kansas City, I'm Sylvia Maria Gross for Marketplace.

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