Attorney Asks Court to Block Grab of Mortgage Settlement Funds

Nov 26, 2012

An attorney for housing rights groups and distressed homeowners asked the state Court of Appeals today to block lawmakers from taking some funds he said are earmarked for them.

The state got $1.6 billion earlier this year as part of a nationwide settlement of a mortgage fraud lawsuit with five lenders. While most of that is for direct aid to homeowners, the state itself got $97 million for other kinds of help like counselors and legal assistance. But lawmakers, looking to balance the budget, took $50 million of that. Attorney Tim Hogan wants the appellate court to block the transfer. But Tim Berg, representing Attorney General Tom Horne, said the federal consent decree gives his client the authority to decide what happens with the funds.

"And what the attorney general has decided to do in the exercise of that power is transfer $50 million to the general fund," Horne said. "And whether you view that as repaying the state for its costs caused by the foreclosure crisis or ameliorating the effect of the foreclosure crisis, it is within the attorney general's discretion to do that."

But Hogan told the court that Horne's 'discretion' was coerced.

"You can't really call that the exercise of discretion when you're being ordered to transfer something and then you have the same bright idea that, you know what, that sounds like a pretty bright idea because otherwise, if I do not do so, my budget as attorney general will be reduced by $50 million," Hogan said.

Hogan wants quick action by the court blocking the transfer, saying people who are in danger of losing their homes need the money now.