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Judge Asked to Void Taking of Mortgage Funds

An attorney for housing advocacy groups asked a judge Wednesday to void a decision by lawmakers to take $50 million from the cash the state got as its share of a nationwide mortgage fraud settlement.

Earlier this year Arizona got $1.6 billion in a nationwide settlement with five lenders. Most of that is for direct aid to homeowners to help avoid foreclosure. There also is cash for those improperly forced out of their homes. And the state itself got $97 million, given to Attorney General Tom Horne. The pact says uses of those dollars include avoiding preventable foreclosures, preventing financial fraud and helping those in mortgage trouble with housing counselors. Attorney Tim Hogan said Horne must hold the funds in trust for those purposes. But legislative attorney Peter Gentala noted that Horne did not challenge the action by lawmakers taking $50 million to balance the state budget. That brought a skeptical response from Judge Mark Brain.

"Well, you don't really want me to believe that Mr. Horne was a willing participant in all this," Brain said. "There are press releases where he said you know, I'm not a big fan in all of this. They ought to leave me alone. Then he kind of acquiesced."

In fact Horne said he did not fight the move because he feared lawmakers would take the $50 million from elsewhere in his budget. But Gentala said that's irrelevant because Horne has the discretion to do what he did.

"And so that sideshow which takes up a lot of time in the pleadings itself, is totally irrelevant," Gentala said.

Brain said he expects to rule on the legality of the transfer in several weeks.

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