The state of California tried to steal from its own foreclosure victims. The specific guilty parties are: Former Governor Jerry Brown and Senator (and Democrat presidential candidate) Kamala Harris.
In 2012, the state of California was awarded $410 million to assist homeowners victimized by abusive foreclosures. Rather than using the money in that manner, Governor Brown chose to divert that money – which belongs to foreclosure victims – into his own budget to cover shortfalls caused by an incredible history of financial mismanagement in California, a state long dominated by liberal (Democrat) economic policies.
This amounts to theft from foreclosure victims. Governor Brown is instigator, and Senator Harris is wholly complicit.
Brown chose to divert $331 million in mortgage relief funding presented AWAY from the homeowners to whom the money was owned and instead chose to use those funds from the reserve to balance state ledgers, paying off state housing bonds and debts owed by state agencies that handled the bonds. While the state did not hide this activity, it certainly did not spotlight the move either.
However, Neil Barofsky, former special inspector general for the Troubled Assets Relief Program (SIGTARP) took immediate aim at the move in his private practice, demanding California use the hundreds of millions to actually help troubled homeowners move on from the housing crisis.
Barofsky, now an attorney with Jenner & Block LLP, sued the state to prevent “the governor from [continuing] to waste taxpayers’ money. $331 million can help an awful lot of homeowners,” Barofsky said. A California appeals court sided with Barofksy and a Sacramento appeals court in saying that California governor Jerry Brown’s “work-around” on the diverted funds, which involved simply signing off on state lawmakers’ budget legislation that said the state could use the relief fund to balance the state budget, was illegal.
“Money was unlawfully diverted from a special fund in contravention of the purposes for which that special fund was established,” wrote the appeals court, which made the decision 3-0.
California received a total of $410 million from the settlement and used more than 80 percent of that money for the state’s general fund. Although the Sacramento court ruled the money should not have been used for state budget purposes in 2014, the judge in the case said he could not order the state to return the funds due to separation of powers case law. With this new ruling, the legality of Brown’s addendum is in question and the current California governor, Gavin Newsom, must decide whether to repeal the ruling or, as Barofsky put it, “instead do the right thing by following the court’s order and finally giving struggling California homeowners the help they should have received nearly six years ago.”
This Could Affect the Democrat Presidential Primary
This ruling is not only a potential pitfall for the California state government; it also could affect democrat presidential nominee hopeful Kamala Harris, who served as state attorney general during negotiations leading to the windfall settlement. Harris opted not to get involved for or against governor Brown when the state appropriated the funds she “won” for troubled homeowners in 2012 and has remained aloof from the proceedings. However, she has routinely and proudly claimed the settlement as a huge success on her track record, a claim that could now create issues for the presidential hopeful.
“We went after the five biggest banks in the United States. We won $20 billion together,” she said in her initial campaign address. Harris, often criticized for going easy on big business interests in her role as California state attorney general, often cites the settlement as proof that she is willing, able, and effective at taking on powerful interests. Interestingly, she spent the day stumping in Nevada rather than voting on a disaster-relief bill (which failed) that would have allocated millions to her state for disaster relief in the wake of 2018’s wildfires.
Do you think this is a win for California homeowners? Do you expect the state to return the funds to the homeowner relief fund?