Maryland will direct most of the nearly $60 million it controls from the national mortgage settlement to housing counseling, legal help for homeowners and anti-blight work, state officials said Wednesday.

Maryland Attorney General Douglas F. Gansler said the money would add to those housing-related efforts and not replace what the state is already spending — with one exception: About $6 million will go to Maryland's general fund.

"I think this will help in a significant way," Gansler said.

The $25 billion settlement — negotiated by state attorneys general to resolve claims that the nation's five largest mortgage servicers broke laws and abused borrowers in the rush to foreclose — calls for about $957 million in total relief to Maryland, most of it in principal reductions and other help for homeowners. The $60 million pool is the only part that state officials could decide how to spend.

Some states have earmarked little or none of their settlement money for housing, instead plugging budget holes or allocating money for uses that critics argue are unrelated, such as economic development.

Gansler said in March that Maryland's money would not be diverted from people "victimized by the egregious conduct of the banks." He said Wednesday that 10 percent will be spent more generally because it is considered a civil penalty and, under state law, must go to the general fund. The settlement agreement says states can take no more than 10 percent as a civil penalty.

A "work group" with representatives from Gansler's office, the governor's office, the General Assembly and other organizations made recommendations about the remaining $54 million. This is how that money will be spent:

•$14 million for statewide neighborhood stabilization in areas deteriorating because of foreclosures. Local governments and other groups — such as developers and nonprofits — will be allowed to submit proposals for a portion of the money.

$10 million for anti-blight housing programs in Baltimore and $10 million for similar work in Prince George's County, both hard-hit by foreclosures. Baltimore officials say they intend to use almost all the money to tear down vacant homes.

$8.6 million for additional housing counseling work by nonprofit groups.

$6.2 million for additional nonprofit legal aid.

$2.7 million for new staffers at the attorney general's office who will work on housing-related civil and criminal cases. The money, spread over three years, will give the office its first employees assigned specifically to that area of enforcement.

$2.1 million for additional employees at the state's financial regulation division to investigate foreclosure-help scams, mortgage servicing problems and other housing fraud.

It's not clear when the state will have the money in hand, though Gansler said it should be soon.

Reece Dameron, co-director of the foreclosure prevention program at St. Ambrose Housing Aid Center in Baltimore, said he was pleased Maryland officials chose to direct 90 percent of the money to housing-related work.

"The money is going to be directed to help people who are suffering from the problem that the settlement is supposed to address," Dameron said. "There are several states that have just put the money in the general fund, and then who knows where it goes?"

But Betsy Cunningham, a real estate attorney from Baltimore, is not pleased. She wanted to see the money spent to directly help Marylanders who lost homes to foreclosure. None of the state's $60 million seems to do that, she said, though the mortgage servicers are supposed to send checks of $1,800 to $2,000 to borrowers they foreclosed on between 2008 and 2011.

"I was expecting something much more creative with $60 million, for Maryland to lead the way in identifying people who have been harmed by what happened," she said.

Julie Day, deputy commissioner for land resources at Baltimore's housing agency, said the city expects to earmark perhaps $500,000 of the $10 million it will get for incentives to buyers purchasing vacant homes. The rest will go to demolition.

The city, which has struggled with vacancy problems for decades and wants to tear down about 4,400 boarded-up homes, hopes the settlement money will cover costs for the first 700.

"The timing of this money is so fortuitous," Day said. "Having this has given us a jump-start, and once folks see real activity, it'll be easier to raise other funds."

jhopkins@baltsun.com

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