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One of the things I heard from a high ranking official in state government is that only a tiny fraction of the “settlement” is translating into actual dollars from the banks to anyone. In Arizona the $1.3 billion is subject to an “earn-down” as it was described to me and the net amount turned out to be $97 million and then on the website for the attorney general of the state, the $97 million became $47 million.
So I brought up my calculator and discovered that out of the “settlement” the banks were paying themselves around $1.2 billion out of the $1.3 billion (some say it is $1.6 billion, but the net left for the state remains unchanged at $97 million) and that some of the balance of the money is “unaccounted for.” By the way this has NOTHING to do with the Arizona Department of Housing, which is as close to non-political as you can get in any government.
So in plain language, the banks are taking money from their left pocket and putting int heir right pocket and saying it was a deal. This sounds a lot like the fake claims of securitization and assignment of debt on housing, student loans, credit cards, auto loans etc. In the end, no money will move except a tiny percentage because since the banks are simply paying themselves out of their own money how bad can the accounting be for them?
In Arizona, the legislature decided, as per the terms of the “settlement” to take the money and use it as part of general operating funds leaving distressed homeowners with nothing. So now there is something of an uproar in Arizona. Here is a $1.3 billion settlement that could have reversed a downward economic spiral for the state that will be felt for decades, and we end up with only 7% of that figure and then at least half, if not all of that is being taken for uses other than homeowner relief that is essential for economic recovery.
My guess is that they will say they are stopping the move to use the homeowner relief funds for perks to corporate donors and then quietly go out and do it anyway. What is your guess?
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By Howard Fischer, Capitol Media Services
State officials agreed Tuesday to delay the transfer of $50 million of disputed mortgage settlement funds, at least for the time being.
Assistant Attorney General David Weinzweig made the offer during a hearing where challengers were hoping to get a court order blocking the move while its legality is being decided by Maricopa County Superior Court Judge Mark Brain. Attorney Tim Hogan of the Arizona Center for Law in the Public Interest, who represents those opposed to the transfer, readily agreed.
“You don’t want to rush the judge,” said Hogan, whose clients are people he believes would be helped by the funds.
“You want him to take his time on important questions like this,” Hogan said. “And so it’s reasonable to agree not to transfer the funds for a certain period of time to give the judge the opportunity to do that.”
The move sets the stage for a hearing in August on the merits of the issue.
Weinzweig told Brain he believes the transfer, ordered by state lawmakers earlier this year, is legal. Anyway, he said, Hogan’s clients have no legal standing to challenge what the Legislature did.
The fight surrounds a $26 billion nationwide settlement with five major lenders who were accused of mortgage fraud.
Arizona’s share is about $1.6 billion, with virtually all of that earmarked for direct aid to those who are “under water” on their mortgages — owing more than their property is worth — or have already been forced out of their homes.
But the deal also provided $97 million directly to the state Attorney General’s Office. The terms of that pact said the cash was supposed to help others with mortgage problems as well as investigate and prosecute fraud.
Lawmakers, however, seized on language which also said the money can be used to compensate the state for the effects of the lenders’ actions. They said the result of the mortgage crisis was lower state revenues, giving them permission to take $50 million from the settlement to balance the budget for the fiscal year that begins July 1.
Hogan’s suit is based on his contention that the settlement terms put the entire $97 million in trust and makes Attorney General Tom Horne, who was authorized by state law to sign the deal, responsible for ensuring the cash is properly spent.
Horne urged lawmakers not to take the funds. But once the budget deal was done, he went along and took the position that, regardless of whether the cash could have been better spent elsewhere, the transfer demand is legal.
Whatever Brain rules is likely to be appealed.
The challenge was brought on behalf of two people who would benefit by the state having more money to help homeowners avoid foreclosure. The lawsuit said both are currently “at risk” of losing their homes.
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