Democratic legislators in California are scrambling to create a new law that will void a recent court ruling that mandates the state use $331 million from a 2012 nationwide settlement with major mortgage servicers to aid homeowners impacted by abusive foreclosures.
According to a San Francisco Chronicle report
, a state appeals court in Sacramento ruled last month that Gov. Jerry Brown improperly channeled the $331 million settlement into paying off the deficits of agencies responsible for state housing bonds and consumer programs. Although the state legislatures approved the funds allocation over the last three years, the court ruled that the state spend the funds on programs directly assisting foreclosed homeowners.
Joshua Gauger, a budget analyst with governor’s Finance Department, told the California Senate Budget and Fiscal Review Committee last week that the state did the right thing in not giving the funds to impacted homeowners. “In the heart of the recession, the state did the best it could in allocating money toward housing measures,” Gauger said.
The legislature’s Democratic-controlled Assembly and Senate have voted to send their respective versions of the legislation to the floor of each chamber for a full vote. The deadline for final passage is Aug. 31. Neil Barofsky, an attorney representing a coalition of organizations that questioned how the state used the funds, promised legal action if the legislation passes. Barofsky said that the “attempts to somehow retroactively endorse” the state’s use of the funds will not work because “those actions were still illegal, and the governor remains under an obligation to use the National Mortgage Settlement Funds as the appellate court found they were intended—to help struggling homeowners.”