Posted by AzBlueMeanie:
Governor Jan Brewer has not even signed the budget passed on Tuesday and already there is a legal challenge in the works to the fund sweep of the mortgage fraud settlement fund. As I briefly mentioned yesterday, Lawmakers' budget proposal would raid mortgage fraud settlement - East Valley Tribune:
State lawmakers are planning to raid a mortgage fraud settlement fund to balance the budget.
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Senate President Steve Pierce said the current intended uses of the funds are a low priority. He said the funds are currently set to be used for things like “advertising on how to keep your own personal finances in shape.”
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But Valerie Iverson of the Arizona Housing Alliance said that “someplace” should be elsewhere. She said there were more than 10,000 foreclosure filings in Arizona last month alone.
“We still have the highest foreclosure rate in the country,” she said. “We figure that the money they’re proposing to sweep could provide 75,000 troubled homeowners with housing counseling and 10,000 homeowners with legal assistance.”
But the issue is more than one of fiscal philosophy and priorities.
Iverson pointed out that the settlement signed on Arizona’s behalf by Attorney General Tom Horne with the lenders has strings on the $97.7 million going directly to the state. It says the money is supposed to go to things like avoiding preventable foreclosures, minimizing the effects of the foreclosure crisis and prosecuting financial fraud.
More to the point, Iverson said, the document uses the word “shall” to describe the uses.
“I’m going by what’s in the consent decree,” Iverson said. And Iverson said her organization, which represents agencies that would get these funds for counseling and legal help, already is consulting with attorneys about filing suit if the provision remains in the budget.
Horne, who signed the documents, isn’t talking about whether the move is legal. About the only thing that press aide Doug Nick would say is that he did not agree to the fund shift.
“It’s being done to us,” Nick said.
The funds are part of a $26 billion pact announced in February with five major lenders to settle claims by Arizona and other states that they acted improperly and illegally in dealing with homeowners who sought mortgage relief. Allegations ranged from refusing to work in good faith with borrowers to outright fraud in providing documents to courts to foreclose on homes.
Arizona’s share was $1.6 billion, with virtually all of the money for borrowers themselves.
That includes $1.3 billion in direct help to those who are “underwater” with their mortgages, owing more than the property is worth. There also is $110 million in payments for those who already lost their homes to lender misconduct and $85 million for interest rate reductions.
And then there was this $97.7 million going directly to the Attorney General’s Office.
Pierce would not address the question of whether the specific wording of the settlement precludes taking the money. Instead he questioned whether Horne had the authority to claim the money on behalf of his office.
“The money was to come to the citizens of Arizona,” he said. Pierce said the only reason the deal was worded the way it was is because Horne got to craft the language about Arizona’s use of the funds.
“He put it to where it comes to him,” Pierce said, suggesting that was improper.
“He is an employee of the state of Arizona,” the Senate president continued. And Pierce said that, for some other states, the pact specified the money was to go directly into the state general fund.
Anyway, Pierce said, it’s not like the money would otherwise be used to help homeowners pay down their mortgages.
Iverson, however, said that misses the point.
“This is the only flexible money that can help with home ownership counseling, legal aid and outreach and education,” she said. And that still leaves 10,000 people a month who could lose their homes.
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“So we need this type of money to be able to counsel the people, provide them legal aid, do the outreach and education so they know where to go to,” she said. Iverson said they need that information to then be able to tap the other direct help programs created by the settlement.
Pierce, however, said he sees the funding being raided as little more than a glorified consumer education program. He said there are more important needs.
Since then, we received this press release from Valerie Iverson of the Arizona Housing Alliance:
Coalition Considering Legal Action Against Proposed Budget Sweep
Phoenix, AZ, May 2, 2012 — Arizona Housing Alliance, a coalition of leaders in the housing industry, is considering legal action to stop a proposed $50 million sweep from the mortgage settlement fund.
Arizona received a payment of $97.7 million to a mortgage settlement fund as part of a settlement reached by 49 states and the country’s five largest mortgage loan servicers who engaged in fraudulent foreclosure practices. The consent judgment stipulates the money should be used to avoid preventable foreclosures, to ameliorate the effects of the foreclosure crisis, and to prevent mortgage fraud.
Governor Brewer and the Legislature’s top Republican leaders’ state budget deal includes a $50 million sweep from the mortgage settlement fund to pay for private prison contracts to provide an extra 500 maximum security beds.
“We are concerned that money intended to reach distressed homeowners might be used for other purposes,” said Andrea Esquer from the Homeowner Advocacy Unit at the Civil Justice Clinic at the Sandra Day O’Connor College of Law, “and we plan to monitor the use of the settlement funds to make sure that homeowners’ rights are protected.”
Arizona Housing Alliance estimates that $50 million could provide 75,000 troubled homeowners with housing counseling and 10,000 homeowners with legal assistance. 9,497 properties in Arizona received foreclosure filings last month, the highest foreclosure rate in the country as reported by RealtyTrac.
Arizona Housing Alliance is a statewide non-profit organization dedicated to supporting and advocating for quality housing that Arizonans can afford.
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For more information or to schedule an interview, please call Val Iverson at 602-622-0111 or email Val at val@azhousingalliance.org.
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