Saturday, March 15, 2014

Califoirnia Governor Jerry Brown and Controller John Chiang Sued for Diverting $369 Million in Mortgage Settlement Money

Having personally worked with AG Kamala Harris's office on the National Mortgage Settlement for California as a representative of ACCE and the Home Defender's League, I have found it appalling that none of the settlement money intended for distressed foreclosed homeowners have reached the victims of the banks.  Rather Governor Jerry Brown and Comptroller John Chiang diverted our funds back to California's general fund.   What was intended for good has become nothing more than a political ploy to balance the budget.  Perhaps had the mortgage settlement money reached its victims California could have experienced a turnaround that truly benefits California.
I applaud the law suit filed against Brown and Chiang as described by The Sacramento Bee:
The Sacramento Bee        March 14, 2014
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Gov. Jerry Brown and Controller John Chiang unlawfully redirected $369 million in homeowner relief secured by Attorney General Kamala Harris, according to a lawsuit filed in Sacramento Superior Court on Friday morning.

A coalition of Latino and African-American faith groups and an Asian-American home counseling organization brought the suit, demanding that California send millions to homeowners trying to stave off foreclosure.

"To this day, countless California victims of the mortgage and foreclosure crisis and their supporters are waiting to receive any benefit, much less the full benefit, of the settlement the Attorney General obtained for the State of California as compensation for the harms the victims suffered and continue to suffer," the lawsuit reads.

The plaintiffs are represented by Neil Barofsky, who achieved prominence as the Treasury Department's inspector general policing the $700 billion Troubled Asset Relief Program, which bailed out the spiraling banking industry.

Harris in 2012 was instrumental in extracting a landmark $25 billion settlement from banks related to the predatory lending practices that helped fuel the housing market's collapse in 2007. Struggling homeowners were supposed to get financial relief from the deal, but the lawsuit filed today demands that Brown repay millions diverted to plug budget gaps.

"The frontline victims of the crisis, struggling homeowners, received mostly unfulfilled promises they would get the help they desperately needed," Barofsky said during a press conference.
As California struggled for ways to balance its books through years of recession-crippled revenue, borrowing from other funds became a common stopgap. The budget lawmakers passed and Brown signed in 2012 transferred $410 million out of the mortgage settlement account.

"The Governor had no legal right to divert these funds in the first place and, even if he did, he certainly has the statutory duty to replenish them in this year of surplus," reads the lawsuit.

A spokesman for the California Department of Finance defended reallocating the money. "While we haven't yet seen the complaint, we're confident that our budget actions are legally sound," H.D. Palmer said in an emailed statement.

The budget maneuver was controversial. Harris herself opposed using the money to cover a budget deficit, saying in a statement at the time that "While the state is undeniably facing a difficult budget gap, these funds should be used to help Californians stay in their homes."

The Legislative Analyst's Office, in contrast, supported the move.  In announcing the lawsuit, National Asian American Coalition general counsel Robert Gnaizda praised Harris for having done "an outstanding job for the homeowners" but said Brown undercut the settlement's purpose, faulting the "slow and often inadequate pace of homeowner relief."

The lawsuit asks for the money to be channeled back into a special fund that Harris would then administer. Gnaizda said Harris has so far declined to meet with the plaintiffs but that they would seek to meet with the attorney general to "see how she can play a role in expediting" the payments to homeowners.


  1. California Sued Over Diversion of Money From National Mortgage ...

    New York Times-Mar 14, 2014
    As part of the $25 billion national mortgage servicing settlement two years ... Under California law, the suit said, money placed in a so-called ...
  2. Church, housing groups sue Gov. Brown over mortgage settlement ...

    Los Angeles Times-Mar 14, 2014
    The money — part of California's share of a $25-billion settlement ... Gnaizda said the lawsuit, filed Friday morning in Sacramento, was a last ...
  3. Housing groups sue California governor for $350 million in ...

    Washington Post-21 hours ago
    California received $12 billion of a $25 billion agreement to help struggling ... a housing advocacy group and one of the three plaintiffs in the lawsuit. ... Brown is not the only governor to dip into the mortgage settlement to ...
  4. Lawsuit Says California Mortgage Money Mishandled

    CBS Local-18 hours ago
    The money was part of the $25 billion settlement between major banks and nearly every state in 2012, with California receiving the largest ...
  5. Lawsuit claims Gov. Brown unlawfully diverted $369M in distressed ...

    Asianjournal.com-12 hours ago
    Lawsuit claims Gov. ... from California's share of the 2012 National Mortgage Settlement, secured by California Attorney General Kamala Harris.
  6. Brown, Chiang sued for diverting $369 million in mortgage money

    Sacramento Bee (blog)-Mar 14, 2014
    the victims suffered and continue to suffer," the lawsuit reads. ... As California struggled for ways to balance its books through years of ... Brown signed in 2012 transferred $410 million out of the mortgage settlement account.
  7. Capitol Alert: Brown, Chiang sued for diverting $369 million in ...

    Fresno Bee-Mar 14, 2014
    "To this day, countless California victims of the mortgage and foreclosure ... in 2012 transferred $410 million out of the mortgage settlement account. ... In announcing the lawsuit, National Asian American Coalition general ...
  8. RBC Among 16 Banks Sued By US Over Rigging Of Key Interest Rate

    Huffington Post Canada-2 hours ago
    The civil lawsuit was filed Friday in federal court in Manhattan. ... contracts around the world, including mortgages, bonds and consumer loans.
  9. Minority Groups Sue Calif. Governor Over Mortgage Settlement

    American Banker-Mar 14, 2014
    A lawsuit alleges that Democratic Gov. ... hundreds of millions of dollars from the national mortgage settlement into California's general fund.
  10. Brown sued for diverting mortgage settlement millions

    Central Valley Business Times-Mar 14, 2014
    The money, the lawsuit says, was supposed to give California homeowners the necessary counseling and assistance to save their homes from ...


Read the suit:







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