California Gov. Jerry Brown signed legislation Monday that attempts to circumvent a court order requiring the state to pay back $331 million to a special fund related to the mortgage crisis.
The bill concerns a 2012 settlement between all 50 states and the major mortgage services related to the Great Recession. States were awarded a collection $2.5 billion, with California bringing in $410 million.
The Legislature passed a law in 2012 to set that money in a special fund. Lawmakers and Gov. Jerry Brown then drew $331 million out of the fund for a variety of other programs, including to service debt on housing bonds.
Three non-profits sued the state in 2014, arguing the money was improperly used. A trial and appeals court sided with the plaintiffs, with the appeals court in July ordering the state to return $331 million to the mortgage fund.
The legislation aims to undo the court ruling by stating the Department of Finance followed legislative guidelines in distributing the money and that lawmakers were “aware of, and approved, the allocations and expenditures in question.”
It’s unclear if the legislation will effectively blunt the court order.
The three plaintiffs were the National Asian American Coalition, COR Community Development Corporation and the National Hispanic Christian Leadership Conference.
Faith Bautista, president of the National Asian American Coalition, said Monday’s action was political “trickery” and called on California lawmakers to honor the courts’ decision.
“I cannot believe the Democrats are stealing money from the homeowners,” she said. “We won.”
When the settlement was adopted, then-California Attorney General Kamala Harris gave guidance that it could be used for consumer fraud education, borrower relief, grant programs to assist housing counselors and other programs or actions that would benefit California homeowners affected by the mortgage crisis, according to the appeals court ruling.
The state moved that money to the general fund to service debt on housing bonds and for public protection and consumer fraud enforcement and litigation.