Earlier court ruling ordered state to divert funds from 2012 lawsuit
AFTER the California Supreme Court ordered the state to return funds from a 2012 settlement to a legal fund for renters and homeowners last month, Gov. Gavin Newsom announced on Wednesday, August 7 a plan to redirect the $331 million that lawmakers illegally spent on debt repayment.
Speaking at a meeting with Public Counsel, a legal aid clinic in Los Angeles, Newsom revealed the plan to divert the funds into what it was originally intended for: a trust fund to help struggling homeowners and renters pay for legal services and advice.
Though the plan would need approval by the Legislature before going into effect, Newsom emphasized to correct the mistakes made by the state’s lawmakers, noting that the Californians who were affected by “unscrupulous practices” by mortgage lending companies deserve the fund.
“The idea that human beings could take advantage of other human beings at this level and go to bed at night and hug their kids is rather extraordinary in and of itself,” the governor said. “Those that aspire to get into [the middle class] are being slammed, because we had been unable to produce enough housing, to prevent evictions and foreclosures and unscrupulous practices and to preserve the existing housing stock.”
As previously reported by the Asian Journal, the State of California received $410 million in a 2012 settlement with the five largest mortgage services in the country: Ally, Bank of America, Citigroup, J.P. Morgan Chase and Wells Fargo. After the national mortgage crisis, these companies were charged with multiple federal violations and agreed to pay more than $20 billion to affected homeowners.
The companies also made a separate payment of $2.5 billion to states to be used for a mortgage fund as a resource for homeowners and renters, with California receiving $410 million. However, $331 million of what the state received was illegally diverted to pay off state debts.
A coalition of homeowners groups, including the Bay Area-based nonprofit National Asian American Coalition (NAAC), have tried to force the state to repay those funds. In 2018, the State Legislature tried to block the ruling of a California appeals court that required the state to return the money to the homeowners’ trust fund.
Last month, the Supreme Court of California rejected the Legislature’s request and left in place the appeals court order, ruling in favor of the homeowners.
“We fought so hard for five years and now we have to fight again for where the money will go,” said Filipina American Faith Bautista, president and chief executive of the NAAC. “This has to be impactful.” (Klarize Medenilla/AJPress)
This story was reposted with permission from the Asian Journal.