Atty to State: Don't Take Foreclosure Settlement Money

May 24, 2012

An attorney for two Arizonans at risk of losing their homes asked a judge today to block lawmakers from taking 50 million dollars out of a special fund designed to help prevent foreclosures to instead balance the state budget. 

Arizona got $1.6 billion in the nationwide settlement with five major lenders. While most is to provide direct help to homeowners, the state itself got $97 million. The settlement spells out how those dollars can be used, including to avoid preventable foreclosures, and to help prosecute financial fraud. The pact lists examples, like paying for housing counselors, legal assistance and foreclosure assistance hotlines. Attorney Tim Hogan said the agreement puts those funds in trust and makes Attorney General Tom Horne, who lawmakers gave authority to sign the deal, responsible for ensuring the cash is properly spent.

"If they had wanted to interfere with the exercise of that power they could have done so earlier, maybe," said Hogan. "But they didn't. Instead they waited until there was a trust fund created. And then they're trying to take money out of the trust fund."

But Horne said the deal includes other permitted uses of the cash.

"One of the provisions is that we can compensate the state for its losses," Horne said. "And the position of the state is that, due to the recession that resulted from the mortgage crisis, they've lost 30 percent of their revenues, which is billion of dollars. $50 million is a tiny fraction of what they've lost."

No date has been set for a hearing.