California obligated to pay $331 million it took from Homeowners fund
A state court judge in Sacramento ruled that California must return $331 million it took from Homeowners fund. The money was taken to help struggling borrowers, but was instead used to patch up the state’s budget.
The fund contained California’s share of a $5 billion nationwide settlement of a fraud suit by states and the federal government against the nation’s five largest mortgage lending companies, including Bank of America, Citigroup, J.P. Morgan Chase, Wells Fargo and Ally Financial, formerly known as GMAC.
The settlement negotiated in 2012 for California was designated to aid homeowners and other housing-related purposes. However, Brown and the Legislature appropriated most of the fund to help pay down the state’s deficit over three fiscal years, through mid-2014.
The groups sued the governor in March 2014, challenging the diversion of funds. The lawsuit concluded that California must return the misused amount to the homeowner fund.
Judge agreed with the plaintiffs that $331 million of that was misused. He ruled that the state must return that amount to the special homeowner fund as soon as there is sufficient appropriation ‘reasonably’ and ‘generally’ available for such purpose.
The three plaintiffs that won the case are the National Asian American Coalition, the COR Community Development Corporation and the National Hispanic Christian Leadership Conference.
The ruling by Frawley was praised by Robert Gnaizda, general counsel to the National Asian American Coalition. It proved that Mr. Brown is not above the law.
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