03/15/2012 09:19 am ET Updated Mar 15, 2012

Former Fort Lyon Correctional Facility May See New Life As Part Of Mortgage Settlement

A former southeastern Colorado prison may benefit from the state's share of a national settlement in the 2008 mortgage crisis by morphing into transitional housing for veterans.

The Fort Lyon Correctional Facility finished moving all 485 of their prisoners March 2, allowing the facility to close and saving the state $6 million annually, according to estimates by the Chieftain. In balancing the state's 2011-2012 budget, the governor has emphasized repurposing the prison, telling the La Junta Democrat "our number one piece of business when we talk to federal entities."

While most of the $25 billion mortgage settlement is allocated for affected homeowners, states received $2.7 billion to spend with no strings attached. Colorado Attorney General John Suthers' Office has discretion over $51 million, according to a report by the Associated Press.

Colorado wouldn't be the first to take money from the settlement and reallocate it to projects other than foreclosure aid, either. Missouri and Wisconsin Govs. Jay Nixon and Scott Walker have suffered a bout of bad press for planning to use the mortgage settlement money to help balance their budgets.

A press release issued on Feb. 9 by the Colorado Attorney General's Office says:

The Office of the Attorney General will work with the Governor’s Office and the General Assembly to ensure that the $52.5 million Colorado directly receives under the settlement will be used for purposes including foreclosure prevention, housing-counseling services, additional legal services for distressed homeowners, promotion of loan-modification opportunities and anti-blight efforts.

The Pueblo Chieftain reports that on Monday, Rep. Sal Pace, D-Pueblo, wrote to Suthers asking that $5 million from the settlement go to Fort Lyon for transitional veteran housing. In his note, Pace mentioned the severe job loss that closure of the prison has inflicted on the surrounding area.

Attorney General Spokesman Mike Saccone, however, told 9News that Suthers is considering many proposals for spending the mortgage settlement.