PHOENIX (CN) – Homeowners asked a Superior Court judge to stop the Arizona Legislature from dumping more than half of the state’s $97 million foreclosure settlement into the state’s General Fund, rather than using it to help distressed homeowners, as intended.
The Legislature on May 1 passed a general appropriations bill, Senate Bill 1523, directing Attorney General Tom Horne “to place $50 million of the settlement funds, more than half of the funds that are to be deposited into court ordered trust fund, into the state’s general fund,” plaintiffs Joseph Morones and Elvira Hernandez say in Maricopa County Court.
Morones and Hernandez – both at risk of losing their homes to foreclosure – say that if “this transfer occurs, the settlement funds in the court-ordered trust fund will not be used for the designated purposes and distressed Arizona homeowners will not receive the assistance they need to be able to stay in their homes and avoid foreclosure.”
In March, “Arizona joined 48 other states and the federal government to sue five major loan servicers and financial institutions for misconduct related to their origination and servicing of single family residential mortgages,” according to the complaint. Horne was to “deposit the settlement funds into a court-ordered trust fund and the principal and interest from that fund can only be used for designated purposes,” the plaintiffs say.
SB 1523 states that the $50 million is to be used to “compensate the state for costs resulting from the alleged unlawful conduct” of Ally/GMAC Mortgage, Bank of America, CitiMortgage, JPMorgan Chase Bank, and Wells Fargo Bank – the five banks named in the federal lawsuit.
The plaintiffs seek declaratory and injunctive relief to stop Horne and Treasurer Doug Ducey “from taking any action to transfer the settlement funds from the court ordered trust fund into the state’s general fund and from using the court ordered trust funds for purposes not designated in the consent judgments.”
They are represented by Timothy Hogan of the Arizona Center for Law in the Public Interest.