Homeowners Sue Arizona over Diverted Foreclosure Settlement Funds
Wednesday, May 30, 2012
(photo: Joel Down, flickr)
Two homeowners in Arizona are suing the state for trying to divert money from the nationwide foreclosure settlement for uses other than helping struggling mortgage holders.
Forty-eight states and the federal government sued five national banks—Ally/GMAC
Mortgage, Bank of Arnerica, CitiMortgage, JPMorgan Chase and Wells Fargo—over mortgage fraud and improper foreclosures. A settlement was reached in which the banks agreed to pay $25 billion, including $2.5 billion in cash that was distributed among the states to help residents in danger of losing their homes.
According to the settlement, “To the extent practicable, such funds shall be used for purposes intended to avoid preventable foreclosures, to ameliorate the effects of the foreclosure crisis, to enhance law enforcement efforts to prevent and prosecute financial fraud, or unfair or deceptive acts or practices…”
Evidently, the Arizona government has chosen a loose interpretation of the phrase “To the extent practicable.” Like at least 15 other states, Arizona has decided to use some of its settlement share for other purposes than to provide mortgage relief. Arizona received $97 million, but is planning to divert $50 million into the state general fund.
Joseph Morones, a single father, and Elvira Hernandez, a 71-year-old widow, both at risk of losing their homes to foreclosure, objected to the diversion and filed suit in a Maricopa County Superior Court. They have asked the court to order a halt to the money being diverted to other uses by state lawmakers.
-Noel Brinkerhoff, David Wallechinsky
To Learn More:
Arizona Wants to Take the Money and Run (by Jamie Ross, Courthouse News Service)
Joseph Morones and Elvira Hernandez v. Tom Horne (Arizona Superior Court, Maricopa County) (pdf)
States Diverting Monies Meant for Homeowners to Cover Budget Deficits (by Noel Brinkerhoff, AllGov)
The Obama Mortgage Settlement is Just Another Bank Bailout in Disguise (by David Wallechinsky, AllGov)
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