Complaint Final (B&W Petition)

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* * * This Petition asks the Court to compel the Governor and other California officials to obey the law. In 2012, following a settlement with five of the nations largest mortgage servicers that was secured in large part due to the important role played by the California Attorney General, a Special Deposit Fund was created as a repository of $369 million in settlement proceeds specifically intended to give California homeowners the necessary counseling and assistance to save their homes from foreclosure, among other similar purposes. The Governor promptlyand, indeed, unlawfullydiverted most of the $369 million away from the Special Deposit Fund and into the General Fund, with no apparent intention of reconstituting the special fund unless the Court compels him to do so. There is no question that the $369 million at issue was required to be deposited into a Special Deposit Fund. There is no question that this sum was supposed to be devoted to the specific purposes for which the Special Deposit Fund was created, as expressly recited in the pertinent settlement documents co-signed by the California Attorney Generals Office. There is no question that most of the money was instead diverted to the States General Fund to pay off the States general debts. And there is no question that the Governor has projected a large budgetary surplus for 2014 and beyond, but has given no indication in his budget that he intends to replenish the diverted funds, now or ever. This Court should therefore compel the Governor and the other named Respondents to follow the law and to allow California homeowners to reap the benefits of the settlement secured for them by their Attorney General. The Governor had no legal right to divert these funds in the first place and, even if he did, he certainly has the statutory duty to replenish them in this year of surplus. Petitioners and their constituents, along with all other affected California residents, desperately require the Special Deposit Fund to be replenished to give them a fighting chance to save their homes from foreclosure and to equip them with the necessary counseling to help avoid future struggles. For this reason, Petitioners ask the Court to issue a writ of mandate compelling the Governor, along with his Director of Finance, the official who formulated the spending plan for the
2 Petition for Writ of Mandate and Complaint for Declaratory and Injunctive Relief
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funds in question, and the Controller, the officer who carried out that directive, to reconstitute the Special Deposit Fund with the unlawfully diverted settlement proceeds. Petitioners are three California-based Section 501(c)(3) organizations whose constituents would benefit from replenishment of the Special Deposit Fund to help them weather the economic storm that continues to sweep so many families out of their homes. Petitioner National Asian American Coalition is a HUD-approved counseling organization that so far has helped more than 6,000 homeowners to avoid foreclosure and eviction. Petitioner COR Community Development Corporation, affiliated with Christ Our Redeemer African Methodist Episcopal Church, is committed to empowering impoverished communities by providing services in the areas of education, financial literacy, affordable housing, and civic engagement. Petitioner National Hispanic Christian Leadership Conference is the largest Latino Christian organization in America, with 6 million members and 40,000 affiliated churches, including approximately 1,500 churches in California. The latter two Petitioners have the infrastructure in place and the intent to provide counseling programs and training to affected homeowners, but only if the required funding becomes available, such as through replenishment of the Special Deposit Fund. Petitioners bring this Petition on behalf of themselves and their California constituents, seeking a writ of mandate, along with declaratory and injunctive relief, against Governor Edmund Gerald Jerry Brown, Director of Finance Michael Cohen, and Controller John Chiang, and allege as follows: INTRODUCTION 1. Two years ago, the federal government and 49 states reached an historic $25 billion
settlement with five of the countrys largest mortgage servicers. That settlement, known as the National Mortgage Settlement, promised retrospective compensation for millions of U.S. homeowners who had allegedly been victimized by the defendant mortgage servicers in the aftermath of the financial crisis. To limit future abuses, the settlement also promised prospective support for housing counselors, consumer fraud education, and other programs designed to assist Californians in their dealings with mortgage service providers, including in negotiating the often convoluted mortgage modification process.
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2.
Under the terms of the National Mortgage Settlement, among other remedies,
borrowers who lost their homes to wrongful foreclosures were to receive payments for the harm they suffered, other wronged homeowners were to receive loan modifications and principal reductions to allow them to stay in their homes, and the federal and state governments were to receive direct cash payments to be dedicated to further homeowner relief, including housing counseling and other programs, as determined by state attorneys general. Through its Attorney General Kamala Harris (Attorney General), the State of California obtained approximately $410 million of the roughly $3.4 billion in direct payments to the federal and state governments. According to the express settlement terms, 10% of this amount (roughly $41 million) was denoted a civil penalty and allocated to the States Unfair Competition Law Fund, while the remaining 90% (roughly $369 million) was placed in a Special Deposit Fund to benefit the States borrowers and organizations that support them. 3. However, as part of an all-too-familiar story for the struggling homeowners who were
the frontline victims of the financial and foreclosure crisis that swept the country, the promises of government assistance soon proved illusory. In contravention of California law and disregarding the commitment made by the Attorney General who forcefully fought to obtain these settlement funds, Respondents unlawfully diverted the entire $369 million from the Special Deposit Fund, devoting little if any of that amount to the benefit of California homeowners or the housing counselors that serve them. Instead, the funds were sent to the States General Fund and spent for other purposes, including the satisfaction of obligations arising from bond issuances that predated the National Mortgage Settlement. To this day, countless California victims of the mortgage and foreclosure crisis and their supporters are waiting to receive any benefit, much less the full benefit, of the settlement the Attorney General obtained for the State of California as compensation for the harms the victims suffered and continue to suffer. 4. Respondents diversion of Special Deposit Fund money violates California law. The
diversion ignores restrictions on the use of special or trust funds in the States possession and turns a blind eye to a series of court-ordered Consent Judgments in derogation of the Attorney Generals well-settled authority to bind the State in the confines of litigation. Petitioners therefore seek a writ
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of mandate compelling Respondents to repay immediately to a Special Deposit Fund (administered by the Attorney General) all unlawfully diverted proceeds of the National Mortgage Settlement, so that California residents harmed by the mortgage and foreclosure crisis can finally realize their full and fair share of that settlement. National Mortgage Settlement 5. On March 12, 2012, just over two years prior to the date of this Petition, five consent
judgments were filed in the United States District Court for the District of Columbia (Consent Judgments). In the Consent Judgments, formally entered on April 5, 2012, the U.S. Department of Justice, the U.S Department of Housing and Urban Development (HUD), other federal agencies, and the attorneys general of 49 states entered into a landmark multi-billion-dollar settlement with five of the countrys largest mortgage servicers. The settlement resolved federal and state claims arising from alleged widespread mortgage servicing abuses. Chief among these alleged abusive practices were that the defendant servicers charged excessive or improper fees for default-related services; misrepresented or miscalculated borrowers eligibility for loan modification programs; failed to engage in required loss-mitigation efforts to avoid foreclosure of single-family residential mortgages; engaged in dual-tracking, or the practice of referring loans to foreclosure or scheduling and conducting foreclosure sales during the loan modification process; and engaged in robosigning, or the practice of executing or filing affidavits in foreclosure proceedings without personal knowledge or any verification of the assertions in the affidavits. 6. Popularly known as the National Mortgage Settlement, the agreement was hailed by
participating government officials as a victory not only for homeowners across the nation but specifically for those in California, which, in addition to other relief, secured a direct payment of approximately $410 million (Direct Payment) to help fund ongoing consumer protection, housing counseling, and foreclosure prevention efforts within the State. 7. To remediate and prevent the alleged harms underlying the settlement, the Consent
Judgments required that 90% of the Direct Payment, or approximately $369 million, be paid to the Office of the Attorney General and placed in a Special Deposit Fund created for the express purposes of funding consumer fraud education and enforcement operations; funding grant programs
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for the benefit of California homeowners affected by the mortgage and foreclosure crisis; providing further borrower relief; and engaging third parties to develop or administer any such programs or efforts. The remaining 10% was denoted a civil penalty and paid into the States Unfair Competition Law Fund. 8. Upon information and belief, after the Direct Payment had been received by the State of
California, by trailer legislation to the 201213 fiscal year budget, a Special Deposit Fund was created in the California State Treasury as a repository for 90% of the Direct Payment (National Mortgage Special Deposit Fund). The relevant portion of the trailer bill is codified at Cal. Gov. Code 12531 (Section 12531). 9. The Direct Payment was, and still is, sorely needed, with the potential of being the
difference between home retention and foreclosure for a vast number of Californians. Shortly after the settlement was announced, and fully consistent with its terms, the Attorney General relayed her intention to use the Direct Payment to pay an independent monitor she hired to make sure banks comply with the settlement, as well as to provide housing counseling, education, and outreach services. Quoting a spokesperson for the Attorney General, the San Francisco Chronicle relayed the Attorney Generals plan to set up an advisory committee and put out much of this money through grants to existing organizations. 10. Respondents have blocked the Attorney Generals plans to implement the National
Mortgage Settlement as required by the Consent Judgments. Respondents drained nearly the entire Special Deposit Fund and used the proceeds almost entirely to offset preexisting obligations and, indirectly, to enable the funding of projects and commitments that have nothing to do with the permissible uses of the Direct Payment or the object for which the National Mortgage Special Deposit Fund was required to be created. Respondents Unlawful Diversion of the Settlement Funds 11. Respondent Governor Brown proposed, and the State legislature enacted, a budget
provision that created the National Mortgage Special Deposit Fund, see Cal. Gov. Code 12531(b), and then, in direct contravention of California law governing such funds, Respondents
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promptly diverted the entire $369 million in settlement proceeds from that special fund to the States General Fund and used nearly all of the money instead for preexisting general obligations. 12. Under California law, money in a Special Deposit Fund may be transferred to the
States General Fund only if the transfer does not interfere with the object for which the special fund was created and the transferred amount is repaid when feasible. Here, the special funds object was clearly and expressly defined by the Consent Judgments themselves, which required that $369 million of the Direct Payment be paid and deposited into a Special Deposit Fund created for the following purposes: [F]or the administration of the terms of this Consent Judgment; monitoring compliance with the terms of this Consent Judgment and enforcing terms of this Consent Judgment; assisting in the implementation of the relief programs and servicing standards as described in this Consent Judgment; supporting the Attorney Generals continuing investigation into misconduct in the origination, servicing, and securitization of residential mortgage loans; to fund consumer fraud education, investigation, enforcement operations, litigation, public protection and/or local consumer aid; to provide borrower relief; to fund grant programs to assist housing counselors or other legal aid agencies that represent homeowners, former homeowners, or renters in housing-related matters; to fund other matters, including grant programs, for the benefit of California homeowners affected by the mortgage/foreclosure crisis; or to engage and pay for third parties to develop or administer any of the programs or efforts described above. (Ex. 1, at B2-3 (emphasis added).) 13. Similarly, where funds in the nature of trust funds are raised by an agency in the
exercise of its police power for a specific purpose, as occurred here, California law prohibits permanent diversion of the funds to unintended uses. 14. In January 2012, facing a budgetary shortfall, Governor Brown proposed a 201213
fiscal year budget replete with necessary spending cuts to balance the State budget and to build a $1.1 billion reserve. On May 14, 2012, however, shortly after the National Mortgage Settlements consummation, Governor Brown unveiled his revised 201213 budget, this time filling part of the budgetary hole with Californias share of settlement proceeds. The enacted budget retained the billion-dollar reserve.
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15.
As reflected in the official summary of the enacted 201213 fiscal year budget, 81% (or
$298 million) of the $369 million that should have been placed in a Special Deposit Fund went not to its originally intended purpose, but rather to make regular payments on preexisting debtin particular, several billion dollars worth of government bonds, issued pursuant to ballot initiatives in 2002 and 2006. Although the previously authorized bond issuances touched on housing matters, this use ran far afield of the stated and legally required purposes of the Direct Payment. Further, no plan to repay these diverted funds has been announced. 16. Even the remaining 19% of the $369 million was not completely used for additional
programs and services relating to foreclosure relief or the other purposes enumerated in the Consent Judgments. Most of the remaining payments simply offset or zeroed out General Fund liabilities: $44.9 million (12%) to the Department of Justice for programs relating to public protection and consumer fraud enforcement, and $8.2 million (2%) to the Department of Fair Employment and Housing to combat housing discrimination. The only part of the $369 million arguably spent properly was $18.4 million (or just 5%) allocated to the Department of Justice to support homeowner counseling services and the Office of the California Monitor (California Monitor) for enforcement activities to oversee compliance with the National Mortgage Settlement. 17. As a result of these diversions, large numbers of homeowners who are eligible for loan
modifications or other relief have been left stranded, and countless fiscally imperiled California homeowners remain unaware of the full scope of their rights. Meanwhile, HUD-approved counseling groups and other aid organizations, which stand ready and willing to effectuate the terms of the Consent Judgments for the benefit of homeowners statewide, remain understaffed and underfunded. 18. This permanent diversion of the Direct Payment to offset existing general liabilities
violates the language and spirit of the Consent Judgments and runs afoul of California law governing the use of special or trust funds. As a repository of trust and agency funds, the National Mortgage Special Deposit Fund could not permissibly have been created as a mere conduit for general-purpose revenues. The diversion at issue thwarted that Funds clear, obvious, and prospective objective of remediating and preventing ongoing mortgage- and foreclosure-related harms. Indeed, under the
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guise of a budgetary maneuver, Respondents have effectively abolished the National Mortgage Special Deposit Fund altogether. 19. In further direct contravention of California law, Respondents budgetary maneuver
usurped the Attorney Generals well-established authority to bind the State within the confines of litigation and to implement court-ordered settlements according to their express terms. Reaction to the Unlawful Diversion of Settlement Funds 20. Reaction to the Governors plan to divert the vast majority of Californias National
Mortgage Settlement Direct Payment to unauthorized uses was swift, loud, and bipartisan. 21. On May 14, 2012, the same day the impending diversion of funds appeared in the
Governors revised budget summary, the Attorney General immediately sounded the alarm. Specifically, she cited the States obligations to Californias homeowners under the National Mortgage Settlement, reiterated the Direct Payments express purpose to get homeowners the expert help they need to keep their homes, and noted that the Governors actions would redirect $410 million from the states homeowners to other budget purposes. The Attorney General stated, these funds should be used to help Californians stay in their homes. (See Ex. 2 for the full statement.) 22. The California Senate Republican Caucus concurred. In a May 18, 2012 report,
affixing the label National Mortgage Settlement Rip-off to both the proposed use of the Direct Payment and the Department of Finances expenditure accounting, that body concluded: Given the apparently tenuous nexus between the settlement documents and the proposed use of funds, it would be appropriate to institute a little bit of transparency for this issue. 23. These criticisms have been ignored by Respondents. Upon information and belief, no
provision to date has been made to repay the vast majority of the expropriated funds, and there is no indication that any of the money will be returned to the National Mortgage Special Deposit Fund for its intended uses. The Foreclosure Crisis Continues in California 24. Notwithstanding the National Mortgage Settlement, California remains awash in
underwater mortgages (meaning the balance owed exceeds the homes current value), struggling
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borrowers, and alleged mortgage-servicer malfeasance. A December 2013 State Department of Justice press release announcing an unrelated mortgage servicing settlement quoted the Attorney General as saying, [O]ur work isnt done. Too many California families are still coping with uncooperative banks and mortgage service providers. My office will continue to fight on their behalf. 25. A federal report issued that same month by the independent monitor appointed to
oversee compliance with the National Mortgage Settlement revealed that three of the five participating loan servicers had failed to comply with certain servicing standards imposed by the Consent Judgments. Another state has initiated a federal court action against one of the participating servicers for violating the National Mortgage Settlement. 26. Homeowners trying to avert foreclosure are confronting problems from the specialized
loan-servicing companiesnon-parties to the National Mortgage Settlementthat have since acquired mortgage payment rights in increasing numbers. As the New York Times reported on February 18, 2014: Shoddy paperwork, erroneous fees and wrongful evictions the same abuses that dogged the nations largest banks and led to a $26 billion settlement with federal authorities in 2012 are now cropping up among the specialty firms that collect mortgage payments, according to dozens of foreclosure lawsuits and interviews with borrowers, federal and state regulators and housing lawyers. .... Katherine Porter, who was appointed by the California attorney general to oversee the national mortgage settlement, says complaints about mortgage transfers have surged, adding that the servicing companies have overpromised and underdelivered. Her office alone has received more than 300 complaints about servicing companies in the last year. 27. Reports issued by the California Monitor and other entities reveal that, while the
condition of Californias housing market has improved since entry of the National Mortgage Settlement, as seen in decreasing delinquency and foreclosure rates, the States homeowners are not receiving all the relief they need. As of September 2013, according to published reports, nearly one in eight California home mortgages remained underwater. Moreover, as reported by the California Monitor, in Sacramento Countyone of the counties hardest hit by the mortgage and foreclosure
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crisisone in five home mortgages was underwater as of June 2013. And as reflected in the California Monitors most recent report, communication problems continue to hamper relations between borrowers and servicers. 28. Shortly after announcement of the challenged diversion, an Associate Director with the
California Reinvestment Coalition, a non-profit group that advocates for low-income and minority communities, publicly observed: We are at a time when the demand for counseling agencies and legal services is at its highest, but unfortunately the capacity to help those who need it is diminished. A lot of agencies have had to shift funds away from foreclosure prevention because the funds arent there. 29. As quoted in a State Department of Justice press release, the California Monitor has
separately noted the invaluable work being done by community-based organizations in working with homeowners up-and-down California to keep struggling families on their feet and to remedy and prevent foreclosure-related harms. The Projected Budget Surplus 30. Although the initial unlawful diversion was purportedly executed to contend with a
budgetary shortfall, the State of California now envisions a significant budget surplus. Indeed, that surplus is estimated to reach $2.4 billion by June 2014 and $5.6 billion by the end of the 201415 fiscal year. Rather than comport with the pertinent California law and use a small fraction of this significant surplus to replenish moneys unlawfully diverted from the National Mortgage Special Deposit Fund, the Governor has instead relayed an intention to reserve at least $1.6 billion of the surplus for a rainy day, notwithstanding the torrent of potentially preventable foreclosures that continue to injure California homeowners. 31. Respondents actions at once violate Californias Constitution, statutes, and case law.
Accordingly, Petitioners respectfully request, among other relief, a writ of mandate directing Respondents immediately to replenish amounts wrongfully diverted from and through the National Mortgage Special Deposit Fund and an order prohibiting Respondents from engaging in future unlawful diversions of Californias National Mortgage Settlement Direct Payment.
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32.
PARTIES Petitioner National Asian American Coalition (NAAC) is a California-based, Section
501(c)(3) non-profit organization that focuses on financial literacy and homeowners rights. A HUD-approved counseling organization, NAAC serves the greater metropolitan Sacramento area, among others. With the aid of public grants, through its Housing Counseling Program, NAAC has helped more than 6,000 homeowners to avoid foreclosures and evictions, achieving a loan modification success rate of approximately 50%. NAAC also has assisted hundreds of homeowners in obtaining settlements via independent foreclosure review. NAAC currently aids numerous homeowners across California in their efforts to secure loan modifications, to undo account errors, or to obtain other relief to thwart potential or imminent foreclosure and eviction. NAAC thus possesses a beneficial interest in the return of funds meant for housing counseling and foreclosure relief that are being spent instead on general expenditures and, accordingly, brings this Petition on its own behalf and that of its California constituents. 33. Petitioner COR Community Development Corporation (COR CDC) is a
California-based, Section 501(c)(3) non-profit organization, affiliated with Christ Our Redeemer African Methodist Episcopal Church. COR CDC is committed to empowering impoverished communities by providing services in the areas of education, financial literacy, affordable housing, and civic engagement. Based in Orange County, COR CDC provides such services in part through its network of approximately 85 affiliated churches in California. Partnering with local government, COR CDC has launched an Affordable Housing Initiative with the goal of creating affordable and stable housing for low and moderate-income households. COR CDC has the intent and infrastructure in place to provide additional counseling programs to benefit the many California homeowners affected by the mortgage and foreclosure crisis and to train third parties to provide such counseling on a community level. COR CDC thus possesses a beneficial interest in the return of funds meant for housing counseling and foreclosure relief that are being spent instead on general expenditures and, accordingly, brings this Petition on its own behalf and that of its California constituents.
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34.
Petitioner National Hispanic Christian Leadership Conference (NHCLC) is a
Sacramento-based, Section 501(c)(3) organization that provides leadership, networking, fellowship, strategic partnerships, and public policy advocacy platforms in the areas of immigrant rights and justice, among others. NHCLC is the largest Latino Christian organization in America, with more than 40,000 affiliated churchesincluding approximately 1,500 in Californiaand 6 million members overall. Facing increasing reports of congregants problems with credit and foreclosures, NHCLC has the intent and infrastructure in place to provide counseling programs to benefit the many California homeowners affected by the mortgage and foreclosure crisis and to train third parties to provide such counseling on a community level. NHCLC thus possesses a beneficial interest in the return of funds meant for housing counseling and foreclosure relief that are being spent instead on general expenditures and, accordingly, brings this Petition on its own behalf and that of its California constituents. 35. Nominal respondent the National Mortgage Special Deposit Fund was supposed to be
the exclusive repository of the $410 million Direct Payment made to California pursuant to the National Mortgage Settlement, less the 10% denoted a civil penalty and deposited in the Unfair Competition Law Fund as required by the Consent Judgments. See Cal. Gov. Code 12531(c). 36. Respondent Edmund Gerald Jerry Brown is Governor of the State of California. The
Governor is the elected officer who bears the Constitutional responsibility to see that the law is faithfully executed. Cal. Const. art. 5, 1. The Governor is vested by State law with ultimate authority over Californias budget. By January of each year, the Governor releases a proposed spending plan to Californias legislature and later signs the enacted budget and any trailer bills into law, which includes the power to reduce or eliminate individual appropriations. The Governor also possess authority to direct transfers of money from Special Deposit Funds to the States General Fund under restrictions imposed by law. 37. Respondent Michael Cohen is Director of Finance for the State of California. The
Director of Finance is a public official, appointed by the Governor to head the Department of Finance, with power to supervise all aspects of State financial policy. The Department of Finance analyzes the yearly budget and prepares a balanced expenditure plan for the Governors approval.
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After its enactment, the Department of Finance administers and oversees the States budget on an ongoing basis. Relevant here, Section 12531 purportedly empowered the Director of Finance to use moneys in the National Mortgage Special Deposit Fund to offset General Fund obligations during the 201112, 201213, and 201314 fiscal years upon submission of an expenditure plan to the Joint Legislative Budget Committee. See Cal. Gov. Code 12531(e)(f). 38. Respondent John Chiang is the Controller of the State of California. The Controller is
the Constitutional officer with authority to superintend the States fiscal affairs. In addition to accounting for appropriations and disbursing State funds, the Controller implements inter-fund transfers at the Governors direction. PETITIONERS STANDING 39. The services provided by Petitioners, including but not limited to those described in
paragraphs 32 through 34, are precisely the types of services to which the Direct Payment should have been dedicated, as expressly required by the Consent Judgments. (See Ex. 1, at B2-3.) Specifically, Petitioner NAAC is a HUD-approved housing counselor that has worked, and continues to work, with California homeowners, former homeowners, or renters in housing-related matters; that aids borrowers in securing relief such as mortgage-loan modifications; and that otherwise provides services to homeowners affected by the mortgage and foreclosure crisis. In addition, Petitioners COR CDC and NHCLC have the infrastructure in place and the intent to develop or administer programs to assist Californians in matters relating to housing and foreclosure, either alone or in combination with other organizations, including through their networks of affiliated churches. 40. Thus, Petitioners and their constituents are beneficially interested in the return of
diverted National Mortgage Settlement proceeds. 41. Further, because this matter involves non-performance of a public duty and
enforcement of a right belonging to the public generally, Petitioners have standing to litigate in the public interest.
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42.
JURSIDICTION AND VENUE The Court has jurisdiction over this Petition and authority to issue a writ of mandate
under Code of Civil Procedure Section 1085. The Court has authority to issue declaratory relief pursuant to Code of Civil Procedure Section 1060 and Government Code Section 11350. 43. Venue is proper under Code of Civil Procedure Section 393 in that a part of the claim
against Respondents arose in the County of Sacramento. 44. Venue is also proper under Code of Civil Procedure Section 395 in that Respondent
Governor Brown resides in the County of Sacramento. 45. As described more fully herein, Respondents have breached mandatory duties imposed
by California law (a) not to divert special or trust funds in the States possession to meet general expenditures without provision for the funds return, (b) not to divert moneys from a special fund to meet general expenditures in a manner that interferes with the carrying out of the special funds object, and (c) to return all moneys so diverted from a special fund as soon as there are sufficient amounts in the General Fund to return them. Respondents are therefore liable in their official capacities for injury caused by the failure to discharge these duties. 46. As further alleged herein, Petitioners do not have a plain, speedy, and adequate remedy
in the ordinary course of law. FACTUAL ALLEGATIONS General Allegations A. The National Mortgage Settlement 47. On February 9, 2012, the federal government announced that it and 49 states had
reached an historic settlement with five of the nations largest bank mortgage servicers to address alleged widespread mortgage servicing, foreclosure, and bankruptcy abuses. The United States District Court for the District of Columbia approved the settlement on April 4, 2012, via Consent Judgments entered against each defendant one day later in United States v. Bank of America, No. 1:12-cv-00361-RMC (D.D.C.). This settlement has come to be known as the National Mortgage Settlement.
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48.
Among the allegations underlying the National Mortgage Settlement were that the
defendant banks systematically charged excessive or improper fees for default-related services; misrepresented or miscalculated borrowers eligibility for loan modification programs; failed to engage in required loss-mitigation efforts to avoid foreclosure of single-family residential mortgages; engaged in dual-tracking, or the practice of referring loans to foreclosure or scheduling and conducting foreclosure sales during the loan modification process; and engaged in robosigning, or the practice of executing or filing affidavits in foreclosure proceedings without personal knowledge or any verification of the assertions in the affidavits. 49. In addition to non-monetary remedies, the National Mortgage Settlement promised
approximately $25 billion worth of monetary relief to borrowers and federal and state agencies. Of this total, $20 billion was required to fund various forms of relief for homeowners, including at least $10 billion for principal reduction for delinquent or about-to-default underwater borrowers; at least $3 billion dedicated to a refinancing program for current but underwater borrowers; and up to $7 billion for other types of relief, including forbearance of principal for unemployed borrowers, short sales, and transitional assistance. A separate $1.5 billion Borrower Payment Fund was created to provide cash payments to persons whose homes were sold or taken in foreclosure between 2008 and 2011. As the largest state to take part in the National Mortgage Settlement, California secured the largest share of settlement funds. 50. In addition to the relief described in paragraph 49, the federal government and states
received a total of approximately $3.4 billion in direct payments under the National Mortgage Settlement to be used for, in the cases of individual states, purposes determined by state attorneys general and explicitly set forth in the Consent Judgments. 51. Such designated uses of the direct payments to the states are recited in Exhibit B2 of
the Consent Judgments. Upon information and belief, the California Attorney General so designated the uses of Californias $410 million Direct Payment. 52. Per the Attorney Generals instruction, the Consent Judgments required that 10% of the
Direct Payment, or approximately $41 million, be paid as a civil penalty into the Unfair Competition
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Law Fund. The Consent Judgments further required that the remaining $369 million be paid and deposited into a Special Deposit Fund created for the purposes listed in paragraph 12. 53. Critically, nowhere do the Consent Judgments authorize use of any part of the Direct
Payment to California for purposes other than those listed, including to offset general expenditures. B. Receipt of the Direct Payment by California 54. The Consent Judgments required the settling defendants to pay a Direct Payment
Settlement Amountincluding the direct payments to the individual statesinto an interest bearing escrow account, which sum shall be distributed in the manner and for the purposes specified in Exhibit B of the Consent Judgments. (Ex. 1, at 3.) The identified purposes include those designated by the Attorney General and quoted in paragraph 12. 55. The Direct Payment Settlement Amountincluding the direct payments to individual
stateswas required to be paid into escrow no later than seven days after the Effective Date of [each] Consent Judgment. (Ex. 1, at 3.) After these payments were made, the defendant loan servicers relinquished all property right, title, interest or other legal claim in any funds held in escrow. (Id.) 56. Upon information and belief, the Direct Payment Settlement Amount in fact was paid
into escrow within seven days of April 5, 2012, the date of entry of the Consent Judgments. 57. Per the Consent Judgments, the escrow agent was to distribute the direct payment to
each state in cash, [i]n accordance with written instructions from each State Attorney General. (Id. at B-2.) 58. In addition, per the Consent Judgments, the Direct Payment to California was to be
made to the California Attorney Generals Office. (Id. at B2-3.) 59. Upon information and belief, the Direct Payment in fact was made to the Attorney
Generals Office in accordance with written instructions from the Attorney General, sometime between April 5, 2012, the date of entry of the Consent Judgments, and June 27, 2012, the date of enactment of Section 12531. C. Funds Within the California State Treasury 60. Californias State Treasury maintains different funds or accounts.
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61.
The General Fund consists of money received into the Treasury and not required by law
to be credited to any other fund. The General Fund is primarily sourced from personal and corporate income taxes, property and sales taxes, and excise taxes. General Fund revenues are the main source of State funding for programs and services and are not restricted to a particular purpose. See generally Cal. Gov. Code 16300. 62. The Special Deposit Fund consists of money which is paid into it in trust pursuant to
law. The fund is appropriated to fulfill the purposes for which payments into it are made. Cal. Gov. Code 16370. Trust funds which have come into the possession of any agency of the State may be paid into the Special Deposit Fund in trust, subject to the right of recovery to fulfill the purposes of the trust. Id. 16371. Whenever any law provides for the payment of money into the treasury which has been collected or received for specific purposes by any State agency, and no fund has been created in the treasury to which it is to be credited, the money shall be credited to the Special Deposit Fund, and shall be held subject to the right of the State agency to recover it, on claims properly presented, for fulfilling the purposes for which the money was collected or received. Id. 16372. 63. Upon information and belief, in addition to the Special Deposit Fund described in
paragraph 62, Special Deposit Funds may be created by operation of law, including by statute. These special funds also are used to budget and account for moneys that have been collected or received for specific purposes by any State agency. In many cases, such funds are continuously appropriated for specific agency purposes and are excluded from the general appropriations process. D. Receipt of the Direct Payment by California 64. Upon information and belief, by the time of Section 12531s enactment in June 2012,
the Direct Payment was already in the Attorney Generals legal possession. This is because once the settlement money was paid into escrow in April 2012, as required by the Consent Judgments, the defendant loan servicers relinquished all property right, title, interest or other legal claim to the funds held in escrow. In maintaining custody of the Direct Payment, in turn, the escrow agent acted as sole agent to the Attorney General, who possessed unfettered ability to cause the funds distribution to the Attorney Generals Office by written instruction.
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65.
Upon information and belief, by the time of Section 12531s enactment, the Direct
Payment was not only in the Attorney Generals legal possession, but it was also in the Attorney Generals actual possession. Upon information and belief, the funds in fact were distributed to the Attorney Generals Office in accordance with written instructions from the Attorney General sometime between April 5, 2012, the date of entry of the Consent Judgments, and June 27, 2012, the date of enactment of Section 12531. 66. Upon information and belief, upon payment of the Direct Payment funds into escrow
for transmission to the Attorney General, they were, or should have been, deposited into the Special Deposit Fund. As a result, and as discussed further in paragraph 62, the payment was required to be held in trust, subject to the right of recovery to fulfill the purposes of the trust, and subject to the right of the [Attorney General] to recover it, on claims properly presented, for fulfilling the purposes for which the money was collected or received. Cal. Gov. Code 1637172. Accordingly, the Direct Payment could not be permanently diverted by the Governor, the State legislature, or any other State actor. E. The National Mortgage Special Deposit Fund 67. Approved on June 27, 2012, Section 12 of Senate Bill 1006, trailer legislation to the
201213 fiscal year budget, created the National Mortgage Special Deposit Fund in the State Treasury, with all moneys in the fund [to be] continuously appropriated. Cal. Gov. Code. 12531(b). 68. The statute creating the National Mortgage Special Deposit Fund begins, The
legislature finds and declares that California, represented by the California Attorney General, entered a national multistate settlement with the countrys five largest loan servicers. Id. 12531(a). It then expressly references the Consent Judgments and mentions Californias $410 million Direct Payment pursuant to the National Mortgage Settlement. See id. 69. The same legislation provides that, less the 10% of the $410 million payment denoted a
civil penalty to be deposited in the Unfair Competition Law Fund, [d]irect payments made to the State of California pursuant to the National Mortgage Settlement . . . shall be deposited in the National Mortgage Special Deposit Fund. Id. 12531(d).
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70.
Section 12531 further states that moneys in the National Mortgage Special Deposit
Fund shall be allocated by the Department of Finance, id. 12531(b), and provides that, [n]otwithstanding any other law, the Director of Finance may allocate or otherwise use the funds in the National Mortgage Special Deposit Fund to offset General Fund expenditures in the 201112, 201213, and 201314 fiscal years, id. 12531(e). 71. Although the provisions legislative summary recites that Section 12531 authorize[s]
the Director of Finance to allocate moneys from the [National Mortgage Special Deposit Fund] to offset General Fund expenditures during the 201112, 201213, and 201314 fiscal years for purposes consistent with the National Mortgage Settlement, S.B. 1006, Legislative Counsels Digest, 12 (emphasis added), the text of the bill itself contains no such express condition. 72. Section 12531 requires the Department of Finance in advance of any intended transfer
to submit an expenditure plan to the Joint Legislative Budget Committee detailing the proposed use of the moneys in the National Mortgage Special Deposit Fund. Cal. Gov. Code. 12531(f). F. Use of the National Mortgage Special Deposit Fund Proceeds 73. As reflected in the official summary of the enacted 201213 fiscal year budget,
Respondents allocated the overwhelming majority of proceeds in the National Mortgage Special Deposit Fund to offset general expenditures in a manner incompatible with the language and purpose of the Consent Judgments and the stated intention of the Attorney General. The distribution of these funds is described in paragraphs 15 and 16. 74. Upon information and belief, with the exception of the $18.4 million allocated to the
Department of Justice to support homeowner counseling services and the Office of the California Monitor, most if not all of the expenditures identified in paragraphs 15 and 16 used diverted moneys from the Direct Payment to offset or zero out existing General Fund liabilities, rather than to fund additional programs or services as expressly provided for by the Consent Judgments. G. Treatment of National Mortgage Special Deposit Fund Offsets 75. Approved on June 27, 2012, Assembly Bill 1464, the appropriations bill relating to the
201213 fiscal year budget, lists a $100 million transfer by the Controller, upon order of the Director of Finance, from the National Mortgage Special Deposit Fund to the General Fund. An
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accompanying passage describes [t]he amount transferred in this item [a]s a loan to the General Fund [to] be repaid upon the order of the Director of Finance by June 30, 2014, to be used to reimburse the General Fund for purposes consistent with the National Mortgage Settlement. 76. Upon information and belief, no other legislation reflects a loan in any amount from the
National Mortgage Special Deposit Fund to the General Fund. 77. A Department of Finance report entitled Outstanding Budgetary Loans Made to the
General Fund, dated January 31, 2014, identifies a $100 million Outstanding Loan Balance for the National Mortgage Special Deposit Fund as of December 31, 2013, with a Projected Loan Repayment Date of 201314. 78. Upon information and belief, the Governors Proposed Budget Summary for 201415
identifies no retransfer of money to the National Mortgage Special Deposit Fund as occurring in either the 201314 or the 201415 fiscal year. Respondents Permanently Diverted Trust Funds 79. 80. Petitioners incorporate by reference the allegations in paragraphs 1 through 78 above. The National Mortgage Special Deposit Fund is both a special fund within the meaning
of California statutes restricting inter-fund transfers, see Cal. Gov. Code 16310(a), 16382, and a repository of trust funds. 81. Recognizing the National Mortgage Special Deposit Funds trust fund status, the
Department of Finance classifies the National Mortgage Special Deposit Funds contents as Fiduciary Funds/Agency Funds, and designates the Funds Classification/Legal Basis as Nongovernmental/Trust and Agency Funds-Non-Federal. (Ex. 3.) Noting the continuously appropriated nature of the National Mortgage Special Deposit Fund, the Department of Finance concludes that [r]evenues in this fund are not proceeds of taxes and even after transfer, will never become proceeds of taxes because the major revenue source is derived from a Trust and Agency fund. (Id.) 82. Additionally, proceeds in the National Mortgage Special Deposit Fund are in the nature
of trust funds under the common law definition. The Funds proceeds were raised in the exercise of the States police power for a particular purposei.e., that of providing borrower relief and
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counseling in the manner recited in the Consent Judgmentsand are permanently set apart for that purpose in a continuously appropriated Special Deposit Fund. 83. Except for the 10% expressly designated a civil penalty and deposited in the Unfair
Competition Law Fund as required by the Consent Judgments, the Direct Payment pursuant to the National Mortgage Settlement is not now, and has never been, a civil penalty. 84. Putatively under authority of Section 12531, Respondents diverted nearly the entire
Direct Payment to California (less the 10% denoted a civil penalty and deposited in the Unfair Competition Law Fund) and used those funds permanently to offset general expenditures, as described in paragraphs 15 and 16. 85. Upon information and belief, as described in paragraphs 64 and 65, the diverted funds
at the time of transfer were trust funds in the Attorney Generals legal and actual possession. 86. In providing for treatment of a $100 million transfer from the National Mortgage
Special Deposit Fund to the General Fund as a loan to the General Fund, the 201213 fiscal year appropriations bill implies that Direct Payment proceeds in fact are special or trust funds, not available for general purposes and therefore fully subject to the usual restrictions on transfer. 87. Upon information and belief, Respondents do not intend to make the $100 million
repayment in either the 201314 or the 201415 fiscal year. 88. Further, even if repaid, there is no indication that this $100 million loan will be used
for the purposes recited in the Consent Judgments. Rather, every available indication is that this $100 million, like the other amounts diverted from the National Mortgage Special Deposit Fund, will be used to offset general expenditures, as described in paragraphs 15 and 16, with no provision for actual repayment. 89. A July 2012 report issued by the California Budget Project, a non-profit organization
that engages in fiscal policy and analysis, states that Californias 201213 budget agreement uses $392 million in proceeds from the recent National Mortgage Settlement to offset an equivalent amount of General Fund spending in 201112, 201213, and 201415. If that is true, then the $100 million loan to the General Fund no more than stows that amount away until Respondents
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use it to offset general expenditures for the 201415 fiscal year, further depriving the National Mortgage Special Deposit Fund and deserving California homeowners alike. The Diversion Thwarted the Object of a Special Fund 90. 91. Petitioners incorporate by reference the allegations in paragraphs 1 through 89 above. The Consent Judgments required that 90% of the Direct Payment (approximately $369
million) be paid and deposited into a Special Deposit Fund created for the . . . purposes recited in Exhibit B2 of the Consent Judgments and quoted in paragraph 12. 92. Upon information and belief, $369 million in fact was paid and deposited into the
National Mortgage Special Deposit Fund pursuant to Section 12531 before being diverted to the General Fund, almost completely for unauthorized purposes. Section 12531 provides that 90% of the Direct Payment shall be deposited in the National Mortgage Special Deposit Fund. Cal. Gov. Code 12531(d) (emphasis added). It further provides that the Director of Finance may allocate or otherwise use the funds in the National Mortgage Special Deposit Fund to offset General Fund expenditures in the 201112, 201213, and 201314 fiscal years. Id. 12531(e) (emphasis added). Similarly, it provides that all moneys in the fund . . . shall be allocated by the Department of Finance. Id. 12531(b) (emphasis added). 93. The statement of purpose for the Special Deposit Fund in the Consent Judgments,
which Section 12531 incorporates by reference, see Cal. Gov. Code 12531(a), reflects that Funds actual and intended purpose. 94. Respondents diversion of the Direct Payment to offset general liabilities almost
completely unrelated to the stated goals of the Special Deposit Fund provided for in the Consent Judgments violates those documents language and spirit and, in so doing, thwarts the National Mortgage Special Deposit Funds objective and prospective purpose of remediating and preventing ongoing mortgage- and foreclosure-related harms. 95. Even assuming that special funds may be earmarked for a particular general purpose,
allocating $298 million of the Direct Payment to debt service on State-issued bonds defied the object of the National Mortgage Special Deposit Fund.
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96.
By contrast, only a small fraction (5%) of the National Mortgage Special Deposit Fund
proceeds, or $18.4 million, has been allocated to an arguably intended use. As a result, untold numbers of homeowners who are eligible for loan modifications or other relief have been left stranded, and countless fiscally imperiled California homeowners remain unaware of the full scope of their rights. Meanwhile, HUD-approved counseling groups and other aid organizations, which stand ready and willing to effectuate the terms of the Consent Judgments for the benefit of homeowners Statewide, remain understaffed and underfunded. 97. The transfer of nearly all of the National Mortgage Special Deposit Funds contents to
meet general obligations thus interfered with the object for which the Fund was created and left the Fund unable to function according to the terms of the Consent Judgments and the intention of the Attorney General. The Diversion Impinges on the Attorney Generals Settlement Authority 98. 99. Petitioners incorporate by reference the allegations in paragraphs 1 through 97 above. The Attorney General is the Constitutional officer in California who shall be the chief
law officer of the State. Cal. Const. art. 5, 13. The Attorney General is in charge of all legal matters in which the State is interested. In the absence of prior legislative restriction, the Attorney General has the power to file any civil action deemed necessary for the enforcement of the laws of the State and the protection of public rights and interests. 100. Absent indication of a conflict as determined by the Governor or Attorney General during the pendency of litigation, the Attorney General has authority to bind the State and the People of California to statements made and positions taken in the course of litigating on their behalf. 101. The Attorney General has authority to settle lawsuits brought on behalf of the State. 102. The Attorney General represented the State of California in negotiating the National Mortgage Settlement, and her office co-signed the Consent Judgments as agent of the State empowered to conduct litigation on its behalf and as representative of the People of California. 103. The Attorney General acted within the scope of her constitutional and statutory authority in negotiating and entering into the National Mortgage Settlement.
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104. Upon information and belief, in accordance with the Consent Judgments express directive, the Attorney General designated the uses of Californias $410 million Direct Payment pursuant to the National Mortgage Settlement, as recited in Exhibit B2 of the Consent Judgments and quoted in paragraph 12. 105. Consistent with the recited purposes, shortly after the settlement was announced, the Attorney General relayed her intention to use the Direct Payment to pay for an independent monitor to ensure compliance with the settlement, as well as for housing counseling, education, and outreach programs, funded through grants to existing organizations. 106. Section 12531 purportedly allows the Direct Payment to be used for purposes other than those for which the signatories to the settlement, including the Attorney General, agreed and intended. In fact, Section 12531 would seem to permit the Director of Finance to allocate the Direct Payment for any purpose, once deposited in the National Mortgage Special Deposit Fund. 107. By permitting the Director of Finance to allocate the moneys in National Mortgage Special Deposit Fund [n]otwithstanding any other law, Section 12531(e) effectively allows the Director of Finance unilaterally to amend the terms of the court-ordered Consent Judgments. This is a grant of authority that the Department of Finance does not otherwise possess and one that usurps the Attorney Generals authority and control over litigation. The Diversion Abolishes a Special Fund Through General Appropriations 108. Petitioners incorporate by reference the allegations in paragraphs 1 through 107 above. 109. As dictated by statute, and as recognized by the Department of Finance, the National Mortgage Special Deposit Fund is a continuously appropriated fund. In its Glossary of Budget Terms, the Department of Finance defines a continuous appropriation as an amount available each year, which may consist of all or a specified portion of the proceeds of specified revenues that have been dedicated permanently to a certain purpose, under a permanent constitutional or statutory expenditure authorization which exists from year to year without further legislative action. 110. Despite the National Mortgage Special Deposit Funds continuous appropriation, upon information and belief, the Governor and Director of Finance submitted the challenged diversions of
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National Mortgage Special Deposit Fund moneys for further legislative approval as part of the 201213 budget package. 111. No specific provision of Section 12531 requires that moneys in the National Mortgage Special Deposit Fund be transferred to the General Fund. Under Section 12531, the Director of Finance may allocate or otherwise use the funds in the National Mortgage Special Deposit Fund to offset General Fund expenditures in any of three consecutive fiscal years, but is not required to do so. Cal. Gov. Code 12531(e) (emphasis added). 112. By diverting nearly all of the National Mortgage Special Deposit Funds contents to the General Fund with no provision for full repayment, Respondents have effectively abolished the National Mortgage Special Deposit Fund. Retransfer of the Diverted Sum is Feasible 113. Petitioners incorporate by reference the allegations in paragraphs 1 through 112 above. 114. Upon information and belief, the Governors proposed 201415 budget summary identifies no retransfer to the National Mortgage Special Deposit Fund during either the 201314 or the 201415 fiscal year. 115. Upon information and belief, California will have a budgetary surplus of $2.4 billion by June 2014. The States reserves are predicted to reach $5.6 billion by the end of the 201415 fiscal year and almost $10 billion by June 2018. 116. The Governor has publicly declared an intent to place $1.6 billion of the 201415 fiscal year surplus into a rainy day fund. 117. Consequently, the General Fund is not exhausted and the return of up to $350 million to the National Mortgage Special Deposit Fund is feasible. Other Remedies are Unavailable 118. Petitioner NAAC has twice demanded the return of all unlawfully diverted National Mortgage Settlement proceeds, to no avail. 119. On November 27, 2013, NAACs President & Chief Executive Officer wrote a letter to Governor Brown urging him, in light of the States improved fiscal condition, to take the required steps promptly to return the diverted money. (Ex. 4.) That request was ignored.
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120. On December 5, 2013, NAACs President & Chief Executive Officer again wrote to Governor Brown, this time requesting a meeting with the Governor and his senior staff and conveying a desire to resolve the matter without legal action. (Ex. 5.) That request, too, was ignored. 121. Thus, there is no plain, speedy, or adequate remedy in the ordinary course of law as to any of the claims asserted herein. FIRST CAUSE OF ACTION (Writ of Mandate, Code of Civil Procedure 1085; Injunction: Permanent Diversion of Trust Funds) 122. Petitioners incorporate by reference the allegations in paragraphs 1 through 121 above. 123. Respondents are responsible for implementing the transfers of funds described herein. 124. California law prohibits the outright diversion of special or trust funds raised for a specific agency purpose to meet general expenditures with no provision for the funds return. 125. Respondents thus had a mandatory duty not to engage in the outright diversion of special or trust funds raised for a specific agency purpose to meet general expenditures with no provision for the funds return. 126. Upon its payment into escrow and receipt by the Attorney Generals Office, the Direct Payment to California pursuant to the National Mortgage Settlement became a trust fund within the States possession. 127. By permanently diverting nearly all of the Direct Payment to meet general expenditures, Respondents breached the mandatory duty described in paragraph 125. 128. Accordingly, Petitioners seek a writ of mandate directing Respondents immediately to refund all unlawfully diverted moneys for payment into a Special Deposit Fund created for the purposes expressed in Exhibit B2 of the Consent Judgments and quoted in paragraph 12. 129. Additionally, Petitioners seek an order enjoining Respondents from the future unlawful diversion of funds received by California pursuant to the National Mortgage Settlement.
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SECOND CAUSE OF ACTION (Writ of Mandate, Code of Civil Procedure 1085; Injunction: Interference with Special Fund Object) 130. Petitioners incorporate by reference the allegations in paragraphs 1 through 121 above. 131. Respondents are responsible for implementing the transfers from the National Mortgage Special Deposit Fund to the General Fund described herein. 132. Although California law allows the Governor and Controller to direct the transfer of moneys not needed in other funds to the General Fund when the General Fund is or will be exhausted, it does not authorize any transfer that will interfere with the object for which a special fund was created. Cal. Gov. Code 16310(a); accord id. 16382. 133. Respondents thus had a mandatory duty not to transfer moneys from the National Mortgage Special Deposit Fund to the General Fund in a manner that interfered with the object for which the National Mortgage Special Deposit Fund was created. 134. By diverting nearly all of the National Mortgage Special Deposit Funds contents to unauthorized uses, Respondents breached the mandatory duty described in paragraph 133. 135. Accordingly, Petitioners seek a writ of mandate directing Respondents immediately to refund all moneys unlawfully diverted from the National Mortgage Special Deposit Fund. 136. Additionally, Petitioners seek an order enjoining Respondents from the future unlawful diversion of moneys in the National Mortgage Special Deposit Fund. THIRD CAUSE OF ACTION (Writ of Mandate, Code of Civil Procedure 1085; Injunction: Single-Subject Rule) 137. Petitioners incorporate by reference the allegations in paragraphs 1 through 121 above. 138. Respondents are responsible for implementing the transfers from the National Mortgage Special Deposit Fund to the General Fund described herein. 139. Respondents are also responsible for proposing and implementing the budget legislation described herein.
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140. Per the State Constitution, [a] statute shall embrace but one subject, which shall be expressed in its title. Cal. Const. art. IV, 9. If a statute embraces a subject not expressed in its title, then the part not expressed is void. Id. 141. This Constitutional provision not only requires all aspects of budgetary enactments to be germane to the subject of appropriations, but it further prohibits budgetary measures that amend existing substantive law or that expand or restrict the substantive authority of any state agency. 142. Masquerading as part of a budget bill, Section 12531 purports to amend court-ordered Consent Judgments. It also expands the power of the Department of Finance over litigation undertaken on behalf of the State and the People of California and correspondingly restricts the substantive authority of the Office of the Attorney General. 143. Respondents have no discretion to engage in cross-fund appropriations that violate Californias Constitution. 144. Accordingly, Petitioners seek a writ of mandate directing Respondents immediately to refund all unlawfully diverted moneys for payment into a Special Deposit Fund created for the purposes expressed in Exhibit B2 of the Consent Judgments and quoted in paragraph 12. 145. Additionally, Petitioners seek an order enjoining Respondents from taking any further action under Section 12531(e) of the California Government Code. FOURTH CAUSE OF ACTION (Declaratory Judgment, Code of Civil Procedure 1060: Single-Subject Rule) 146. Petitioners incorporate by reference the allegations in paragraphs 1 through 121 above. 147. Respondents are responsible for implementing the transfers from the National Mortgage Special Deposit Fund to the General Fund described herein. 148. Respondents are also responsible for proposing and implementing the budget legislation described herein. 149. Per the State Constitution, [a] statute shall embrace but one subject, which shall be expressed in its title. Cal. Const. art. IV, 9. If a statute embraces a subject not expressed in its title, then the part not expressed is void. Id.
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150. This Constitutional provision not only requires all aspects of budgetary enactments to be germane to the subject of appropriations, but it further prohibits budgetary measures that amend existing substantive law or that expand or restrict the substantive authority of any state agency. 151. Masquerading as part of a budget bill, Section 12531 purports to amend court-ordered Consent Judgments. It also expands the power of the Department of Finance over litigation undertaken on behalf of the State and the People of California and correspondingly restricts the substantive authority of the Office of the Attorney General. 152. An actual controversy exists between Petitioners and Respondents concerning Respondents permanent diversion of special or trust funds within the States possession to unintended uses. 153. Accordingly, Petitioners seek a judicial determination that the offsets at issue violate Article IV, Section 9 of Californias Constitution. 154. Alternatively, to avoid a constitutional violation, Petitioners seek a judicial determination that the purported offsets are temporary inter-fund loans, subject to the usual restrictions on such transfers, which demand that the transferred funds be immediately repaid. FIFTH CAUSE OF ACTION (Declaratory Judgment, Code of Civil Procedure 1060: Special Fund Abolishment) 155. Petitioners incorporate by reference the allegations in paragraphs 1 through 121 above. 156. Respondents are responsible for implementing the transfers from the National Mortgage Special Deposit Fund to the General Fund described herein. 157. Respondents are also responsible for proposing and implementing the budget legislation described herein. 158. Section 12531 is internally inconsistent. It permanently sets aside 90% of the Direct Payment in the National Mortgage Special Deposit Fund by continuous appropriation as dedicated to a certain purpose, while purportedly granting permission to the Department of Finance to use the National Mortgage Special Deposit Funds entire contents for general purposes. 159. The legislature could not logically have intended simultaneously to create a continuously appropriated Special Deposit Fund (pursuant to the Consent Judgments) and to
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facilitate its implied repeal through the diversion of its contents via general budgetary appropriations. 160. Thus, the provision of Section 12531 creating the National Mortgage Special Deposit Fund as a continuously appropriated fund must be given effect. 161. An actual controversy exists between Petitioners and Respondents concerning Respondents permanent diversion of special or trust funds within the States possession to unintended uses. 162. Accordingly, Petitioners seek a judicial determination that the purported offsets at issue are temporary inter-fund loans, subject to the usual restrictions on such transfers, which demand that the transferred funds be immediately repaid. SIXTH CAUSE OF ACTION (Writ of Mandate, Code of Civil Procedure 1085; Injunction: Feasibility of Retransfer) 163. Petitioners incorporate by reference the allegations in paragraphs 1 through 121 above. 164. Respondents are responsible for implementing the transfers from the National Mortgage Special Deposit Fund to the General Fund described herein. 165. Although California law allows the Governor and Controller to direct the transfer of moneys not needed in other funds to the General Fund when the General Fund is or will be exhausted, [a]ll moneys so transferred shall be returned to the funds or accounts from which they were transferred as soon as there are sufficient moneys in the General Fund to return them, Cal. Gov. Code 16310(a), or else retransfers shall be made . . . in season so that the objects for which [the special funds] were created may be carried out, id. 16382. 166. Respondents thus had a mandatory duty to return moneys diverted from the National Mortgage Special Deposit Fund as soon as there were sufficient amounts in the General Fund to return them, or else in season so that the object for which the National Mortgage Special Deposit Fund was created may be carried out.
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167. By failing to return moneys diverted from the National Mortgage Special Deposit Fund despite a projected multi-billion-dollar budgetary surplus, Respondents breached the mandatory duty described in paragraph 166. 168. Accordingly, Petitioners seek a writ of mandate directing Respondents immediately to refund all moneys unlawfully diverted from the National Mortgage Special Deposit Fund. 169. Additionally, Petitioners seek an order enjoining Respondents from the future unlawful diversion of funds received by California pursuant to the National Mortgage Settlement. REQUEST FOR ATTORNEYS FEES 170. This Court has power under the equitable common fund doctrine to award attorneys fees to Petitioners where the creation, recovery, preservation, or increase of an identifiable fund of money benefits others as well as Petitioners. 171. This Court has power under the equitable substantial benefit doctrine to award attorneys fees to Petitioners where they obtain a decision resulting in the conferral of a substantial benefit of a pecuniary or nonpecuniary nature on others as well as Petitioners. 172. This Court has power under Code of Civil Procedure Section 1021.5, the Private Attorney General statute, to award attorneys fees to Petitioners where (a) a significant benefit, whether pecuniary or non-pecuniary, has been conferred on the general public or a large class of persons; (b) the necessity and financial burden of private enforcement are such as to make this award appropriate; and (c) such fees should not in the interest of justice be paid out of the recovery of funds at issue in the action. PRAYER FOR RELIEF WHEREFORE, Petitioners pray that this Court: 173. Issue a writ of mandate directing Respondents immediately to refund all unlawfully diverted moneys for payment into a Special Deposit Fund (administered by the Attorney General) created for the purposes expressed in the Consent Judgments and quoted in paragraph 12, whether the fund be the National Mortgage Special Deposit Fund or another Special Deposit Fund; 174. Issue an order directing Respondents to refrain from taking any further action under Section 12531(e) of the California Government Code;
175. Issue a declaratory judgment that the purported offsets at issue violate the California Constitution and/or otherwise violate California law, and are in fact inter-fund loans that must be immediately repaid; 176. Issue an order enjoining Respondents from the future unlawful diversion of funds received by California pursuant to the National Mortgage Settlement; 177. Award Petitioners costs and fees as permitted by law, including attorney's fees pursuant to the equitable "common fund" doctrine, the equitable "substantial benefit" doctrine, and/or Code of Civil Procedure Section 1021.5; and 178. Order such other and further relief as may be just and proper.
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10
11 DATED: March 14, 2014 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
JENNER & BLOCK LLP
Attorneys for Petitioners National Asian American Coalition, COR Community Development Corporation, and National Hispanic Christian Leadership Conference
33
Petition for Writ of Mandate and Complaint for Declaratory and Injunctive Relief
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VERIFICATION
I am authorized to make this verification for and on behalf of the National Asian American Coalition, COR Community Development Corporation, and the National Hispanic Christian Leadership Conference, and I make this verification for that reason. I have read the foregoing Verified Petition for Writ of Mandate and know its contents. Except as to those matters that are stated on information and belief, and as to those matters I believe them to be true, and except as to those matters which are evidenced by documents attached to this Petition (which I also believe to b|e true), the matters stated in the foregoing Verified Petition for Writ of Mandate are true of my own knowledge. I declare under penalty of perjury under the laws of the State of California that the foregoing is to the best of my knowledge true and correct.
Executed on March 14,2014, in Los Angeles, California.
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Faith Bautista
Natl Asian Am. Coal. et al. v. Brown et al. Verified Petition for Writ of Mandate and Complaint for Declaratory and Injunctive Relief
EXHIBIT 1
Case 1:12-cv-00361-RMC Document 11
Filed 04/04/12 Page 1 of 86
Filed 04/04/12 Page 13 of 86
Filed 04/04/12 Page 14 of 86
Case 1:12-cv-00361-RMC Document 11-1 1-4 Filed Filed 03/12/12 04/04/12 Page Page 137 44 of 224 317
EXHIBIT B
DISTRIBUTION OF FUNDS 1. Any amount of the Direct Payment Settlement Amount that is not
distributed pursuant to Paragraph 2 shall be distributed as follows. a. Federal Payment Settlement Amount. The Escrow Agent shall distribute
$911,777,917.00 (the Federal Payment Settlement Amount) to the United States in accordance with instructions to be provided by the United States.
i. Of the Federal Payment Settlement Amount, $684,090,417.00 shall, following payment of any amounts owed as a result of resolutions
pursuant to 31 U.S.C. 3730(d), and subject to 28 U.S.C. 527 (Note), be deposited for losses incurred into FHAs Capital Reserve Account, the Veterans Housing Benefit Program Fund (pursuant to 38 U.S.C. 3722(c)(3), as being incident to housing loan operations) or as otherwise directed by the Department of Veterans Affairs, and as directed by Rural Housing Service, Department of Agriculture, in accordance with instructions from the United States. The United States intends that such deposits conform with the Miscellaneous Receipts Act and other law.
ii. The Federal Payment Settlement Amount includes resolution of the

following qui tam actions: (i) $75,000,000 from the claims in United
States ex rel. Lagow v. Countrywide Financial Corp., et al., Civil Action No. CV-09-2040 (E.D.N.Y.); (ii) $45,000,000 from those claims in United States ex rel. Bibby et al. v. JPMorgan Chase et al., No. 2:11-cv-00535-RHL-RJJ (N.D. Ga.) that are expressly released by the United States in this litigation; (iii) $95,000,000 from those claims in United States ex rel. Szymoniak v.
[SEALED], Civ No. 0:10-cv-01465 (D.S.C.) and in United States ex rel. Szymoniak v. [SEALED], Civ No. 3:10-cv-575 (W.D.N.C.) that are expressly released by the United States in this litigation; (iv) $6,500,000 from the claims in United States ex rel. Mackler v. Bank of America, N.A., et al., 11-CV-3270 (SLT) (E.D.N.Y.); and (v) $6,187,500 from the claims in United States ex rel. Harris v. J.P. Morgan Chase & Co., et al., Civil Action No. 10-10068-GAO (D. Mass). Following payment of any amounts owed as a result of
resolutions pursuant to 31 U.S.C. 3730(d), and subject to 28 U.S.C. 527 (Note), these amounts shall be deposited into FHAs Capital Reserve Account and the Veterans Housing Benefit Program Fund (pursuant to 38 U.S.C. 3722(c)(3), as being incident to housing loan operations) or as otherwise directed by the Department of Veterans Affairs, in accordance with instructions from the United States. The United States intends that such deposits conform with the Miscellaneous Receipts Act and other law.
b. State Payment Settlement Amounts. In accordance with written instructions from each State Attorney General, the Escrow Agent shall distribute cash payments in the total amounts set forth in the attached Exhibit B-1. i. Each State Attorney General shall designate the uses of the funds set forth in the attached Exhibit B-1. To the extent practicable, such funds shall be used for purposes intended to avoid preventable foreclosures, to ameliorate the effects of the B-2
foreclosure crisis, to enhance law enforcement efforts to prevent and prosecute financial fraud, or unfair or deceptive acts or practices and to compensate the States for costs resulting from the alleged unlawful conduct of the Defendants. Such permissible purposes for allocation of the funds include, but are not limited to, supplementing the amounts paid to state homeowners under the Borrower Payment Fund, funding for housing counselors, state and local foreclosure assistance hotlines, state and local foreclosure mediation programs, legal assistance, housing remediation and anti-blight projects, funding for training and staffing of financial fraud or consumer protection enforcement efforts, and civil penalties. Accordingly, each Attorney General has set forth general instructions for the funds in the attached Exhibit B-2. ii. No more than ten percent of the aggregate amount paid to the State Parties under this paragraph 1(b) may be designated as a civil penalty, fine, or similar payment. The remainder of the payments is intended to remediate the harms to the States and their communities resulting from the alleged unlawful conduct of the Defendant and to facilitate the implementation of the Borrower Payment Fund and consumer relief. 2. Of the Direct Payment Settlement Amount, $1,579,813,925.00 shall be
distributed as follows:
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a. In accordance with written instructions from the State members of the Monitoring Committee, the Escrow Agent shall make available $1,489,813,925.00 to the Administrator to provide cash payments to borrowers whose homes were finally sold or taken in foreclosure between and including January 1, 2008 and December 31, 2011; who submit claims arising from the Covered Conduct; and who otherwise meet criteria set forth by the State members of the Monitoring Committee. Any amounts made available hereunder remain a part of the Qualified Settlement Fund until distributed to borrowers and shall be administered in accordance with the terms set forth in Exhibit C. b. In accordance with written instructions from the State members of the Monitoring Committee, the Escrow Agent shall distribute $15,000,000.00 to the National Association of Attorneys General (NAAG) to create and administer the Financial Services and Consumer Protection Enforcement, Education and Training Fund. Such Fund shall be used to pay for expenses and training relating to the investigation and prosecution of cases involving fraud, unfair and deceptive acts and practices, and other illegal conduct related to financial services or state consumer protection laws. Illustrative examples include, but are not limited to, travel costs associated with investigation, litigation, or settlement of financial services or consumer protection cases; expert witness and consulting fees, training programs, NAAG Consumer Protection Conferences, information
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exchanges, public education campaigns, and other uses. The State members of the Monitoring Committee shall develop rules and regulations governing the Financial Services and Consumer Protection Enforcement, Education and Training Fund in a separate memorandum of understanding after this Consent Judgment has been entered. c. In accordance with written instructions from the State members of the Monitoring Committee, the Escrow Agent shall distribute a total of $10,000,000.00 to the members of the Executive Committee and the Ameriquest Financial Services Fund (AMFSF) for reimbursement of costs and attorneys fees incurred during the investigation of this case and the settlement negotiations and for subsequent expenditures as authorized by each Attorney General. Such payments shall be made as designated by the Iowa Attorney General as the Chairman of the Executive Committee, and shall be made to the State Attorneys General of Arizona, California, Colorado, Connecticut, Delaware, Florida, Illinois, Iowa, Massachusetts, North Carolina, Ohio, Tennessee, Texas, and Washington and the Maryland Department of Labor, Licensing and Regulation and the Ameriquest Financial Services Fund. The authorized representatives of each state attorney general, the Maryland Department of Labor, Licensing and Regulation and the AMFSF will provide a letter to the Escrow Agent directing how each separate payment should be made.
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d. In accordance with written instructions from the State members of the Monitoring Committee, the Escrow Agent shall distribute $65,000,000.00 to the Conference of State Bank Supervisors (CSBS). CSBS shall use $15,000,000 to establish the State Financial Regulation Fund, a fund to be managed and used by CSBS to support and improve state financial regulation and supervision. From the balance, CSBS shall transfer $1,000,000 per state to the state financial regulators who have signed this Consent Judgment. Where multiple agencies within a single state claim regulatory jurisdiction, CSBS shall transfer that states funds as provided in an agreement between or among those regulatory agencies. In addition, state financial regulators may, at their discretion, enter into an agreement with CSBS for the management and disbursement of all or a portion of the funds paid to them. If, for any reason, a state financial regulator elects to forego receipt of their transfer payment or in the case of a participating state where the state financial regulator declines to sign this Consent Judgment, such funds shall revert to the State Financial Regulation Fund. 3. Any interest earned on funds held by the Escrow Agent may be used, at the discretion of the State members of the Monitoring Committee, to pay the costs and expenses of the escrow or the costs and expenses of administration, including taxes, or for any other housing related purpose.
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4. Notwithstanding any implication to the contrary in any of the provisions of Exhibit B-2, all instructions therein shall be subject to the provisions of paragraph 1.b(i) and 1.b(ii) of this Exhibit B. If and to the extent any amounts are paid into a fund or escrow account established by a State Party that is not an integral part of the government of such State, it is intended that such fund or account be deemed a Qualified Settlement Fund within the meaning of Treasury Regulation Section 1.468B-1 of the U.S. Internal Revenue Code of 1986, as amended. To the extent that any state designates any payments hereunder as a civil penalty, such state shall provide the Defendant(s), upon request, such information as is reasonably necessary for tax reporting purposes with respect to such civil penalty.
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EXHIBIT B1
EXHIBIT B1
STATE AK AL AR AZ CA CO CT DC DE FL GA HI IA ID IL IN KS KY LA MA MD ME MI MN MO
DOLLAR ALLOCATION $3,286,839 $25,305,692 $12,830,241 $97,784,204 $410,576,996 $50,170,188 $26,102,142 $4,433,081 $7,913,923 $334,073,974 $99,365,105 $7,911,883 $14,651,922 $13,305,209 $105,806,405 $43,803,419 $13,778,401 $19,198,220 $21,741,560 $44,450,668 $59,697,470 $6,907,023 $97,209,465 $41,536,169 $39,583,212
STATE MS MT NC ND NE NH NJ NM NV NY OH OR PA RI SC SD TN TX UT VA VT WA WI WV WY
DOLLAR ALLOCATION $13,580,374 $4,858,276 $60,852,159 $1,947,666 $8,422,528 $9,575,447 $72,110,727 $11,174,579 $57,368,430 $107,642,490 $92,783,033 $29,253,190 $66,527,978 $8,500,755 $31,344,349 $2,886,824 $41,207,810 $134,628,489 $21,951,641 $66,525,233 $2,552,240 $54,242,749 $30,191,806 $5,748,915 $2,614,515
EXHIBIT B2
EXHIBIT B2 ALABAMA The Court awards the State of Alabama a judgment in the amount of $25,305,692, which shall be paid by electronic transfer to the Office of the Attorney General. Of this amount, the Court awards $2,530,569 dollars in civil penalties (or 10% of the total) as defined by and in accordance with Code of Alabama, 1975, 8-19-11 for misconduct relating to the banks robo-signing in violation of Alabamas Deceptive Trade Practices Act. The remaining amount shall be used by the Attorney General, at his sole discretion, for costs of investigation and litigation, for law enforcement efforts to prevent and prosecute financial fraud, and/or for public protection purposes, such as to defray the operating cost of any function of the Attorney Generals Office that protects citizens, whether through investigation, representation, regulation, mediation, prosecution, victims assistance, or consumer education concerning consumer-related financial or other crimes, or, at the sole discretion of the Attorney General, to be used for housing programs, housing counseling, legal assistance, foreclosure prevention hotlines, foreclosure mediation and investigation of financial fraud or other wrongdoing overseen by any division of the Attorney Generals Office. In addition, the Attorney General may distribute any amount from the funds, at his sole discretion, to other governmental entities or charitable organizations whose eleemosynary purposes benefit those affected by the aforementioned misconduct ALASKA Alaskas payment of $3,286,839.00 shall be to the State of Alaska and delivered to the Office of the Attorney General, 1031 West 4th Avenue, Suite 200, Anchorage, Alaska 99501. ARIZONA 1. State Payment Settlement Amounts, Consent Judgment Ex. B, Paragraph 1(b)(i) Arizonas share of the State Payment Settlement Amounts (Funds) provided under this Consent Judgment, and any interest thereon, shall be made payable to the Office of the Arizona Attorney General. The Attorney General shall direct the use of the Funds in Arizona. The 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 and to compensate the State for costs resulting from the alleged unlawful conduct of the Defendants. Such permissible purposes for allocation of the funds include, but are not limited to, supplementing the amounts paid to state homeowners under the Borrower Payment Fund, funding for housing counselors, state and local foreclosure assistance hotlines, state and local foreclosure mediation programs, legal assistance, housing remediation and anti-blight projects, funding for training and staffing of financial fraud or consumer protection enforcement efforts, and civil penalties.
The Attorney General shall deposit the Funds with the State Treasurer and the Funds shall be held in a separate Court Ordered Trust Fund account and all interest thereon deposited into that account and used only for the purposes set forth herein. 2. Executive Committee Payment, Consent Judgment Ex. B, Paragraph 2(c) Any funds paid to the Office of the Arizona Attorney General as reimbursement for attorneys fees and costs for serving on the Executive Committee, and any interest thereon, shall be deposited into the consumer fraud revolving fund pursuant to A.R.S. 44-1531.01 and used for the purposes set forth therein. ARKANSAS For the payment to the State of Arkansas as provided in Paragraph III (3) of the Consent Judgment, and it accordance with the provisions of Paragraph 1. (b) of Exhibit B to the Consent Judgment, Attorney General Dustin McDaniel directs that the total anticipated sum of Twelve Million, Eight Hundred Thirty Thousand, two hundred and forty-one dollars ($12,830,241) be paid to the State of Arkansas Office of the Attorney General (and delivered to Carol Thompson, Chief Financial Officer) to then be distributed by the Attorney General to the following entities for the following purposes: 1. To the Arkansas Development Finance Authority to fund programs that provide to Arkansas residents down payment assistance, financial literacy and mortgage and foreclosure counseling ,tax credit assistance, rental assistance, low-interest financing, land acquisition, new construction, rehabilitation construction, and reconstruction, the sum of Nine Million dollars ($9,000,000.00); 2. To the Arkansas Access to Justice Commission to provide equal access to justice to Arkansas residents affected by the mortgage and foreclosure crisis, the sum of Two Million dollars ($2,000,000.00); 3. To the University of Arkansas School of Law to support its legal aid clinic, which provides legal representation to low-income Arkansans, the sum of Five Hundred Thousand dollars ($500,000.00); 4. To the University of Arkansas at Little Rock School of Law to support its legal aid clinic, which provides legal representation to low-income Arkansans, the sum of Five Hundred Thousand dollars ($500,000.00); And, to the Arkansas Treasury the remaining funds for fees, costs, and the costs of investigation and pursuit of this matter, the sum of Eight Hundred Thirty Thousand, two hundred and forty-one dollars ($830,241.00).
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CALIFORNIA The payment to the California Attorney Generals Office shall be used as follows: a) Ten percent of the payment shall be paid as a civil penalty and deposited in the Unfair Competition Law Fund; b) The remainder shall be paid and deposited into a Special Deposit Fund created for the following purposes: for the administration of the terms of this Consent Judgment; monitoring compliance with the terms of this Consent Judgment and enforcing the terms of this Consent Judgment; assisting in the implementation of the relief programs and servicing standards as described in this Consent Judgment; supporting the Attorney Generals continuing investigation into misconduct in the origination, servicing, and securitization of residential mortgage loans; to fund consumer fraud education, investigation, enforcement operations, litigation, public protection and/or local consumer aid; to provide borrower relief; to fund grant programs to assist housing counselors or other legal aid agencies that represent homeowners, former homeowners, or renters in housing-related matters; to fund other matters, including grant programs, for the benefit of California homeowners affected by the mortgage/foreclosure crisis; or to engage and pay for third parties to develop or administer any of the programs or efforts described above. COLORADO 1. State Payment Settlement Amounts, Consent Judgment Ex. B, Paragraph 1(b)(i) The first $1.0 Million paid to the State of Colorado pursuant to Ex. B, 1(b)(i), and any interest thereon, shall be held in trust by the Colorado Attorney General and used for future consumer protection and antitrust enforcement and education efforts. The remainder of the funds paid under this provision, and any interest thereon, shall be held in trust by the Colorado Attorney General and used for programs relating to foreclosure prevention, loan modification and housing and for future consumer protection and antitrust enforcement and education efforts. 2. Executive Committee Payment, Consent Judgment Ex. B, Paragraph 2(c) The funds paid to the State of Colorado under Ex. B, 2(c), and any interest thereon, shall be held in trust by the Colorado Attorney General for the following purposes. First, these funds, and any interest thereon, shall be used for reimbursement of the states actual costs and attorney fees incurred in this matter. The remaining funds, and any interest thereon, shall be held in trust by the Colorado Attorney General and may be used for programs related to foreclosure prevention, loan modification and housing and for future consumer protection and antitrust enforcement and education efforts. CONNECTICUT The Escrow Agent shall pay up to $2.2 million of the Direct Payment Settlement Amount payable to the State of Connecticut pursuant to paragraph 1(b) of Exhibit B of this B2-3
Consent Judgment to provide immediate assistance to Connecticut residents seeking to avoid foreclosure by funding housing counselor positions through the Connecticut Housing Finance Authority and/or the Department of Economic and Community Development and by funding positions and other support to facilitate and expand the Judicial Branchs foreclosure related programs. All of the remaining Direct Payment Settlement Amount payable to the State of Connecticut pursuant to paragraph 1(b) of Exhibit B of this Consent Judgment shall be disbursed at the written instruction of the Office of the Attorney General after consultation by the Office of the Attorney General with the Office of Policy and Management and appropriate officials of the State of Connecticut as may be required by Connecticut law. The Escrow Agent shall pay any Direct Payment Settlement Amount payable to the Office of the Attorney General pursuant to paragraph 2(c) of Exhibit B of this Consent Judgment to the Attorney Generals Consumer Protection Fund, which funds shall be expended to fund protection and education of consumers, including, without limitation, legal assistance to Connecticut citizens seeking to avoid foreclosure, grants to non-profit legal aid organizations assisting Connecticut citizens seeking to avoid foreclosure, funding to support implementation of this Consent Judgment by the Office of the Attorney General, and for any other purposes intended to avoid preventable foreclosures and to ameliorate the effects of the foreclosure crisis. DELAWARE The amount of $7,913,923.00 will be paid to the Delaware Department of Justice by wire transfer or certified check payable to the State of Delaware Consumer Protection Fund, which shall be used in the sole discretion of the Delaware Department of Justice exclusively for the following purposes related to consumer protection efforts to address the mortgage and foreclosure crisis, financial fraud and deception, and housing-related conduct: (1) investigations, enforcement operations, litigation, and other initiatives conducted or overseen by the Delaware Department of Justice Fraud Division, including training and staffing, (2) the Delaware Automatic Residential Mortgage Foreclosure Mediation Program or any successor program, and (3) grants or other aid to agencies and organizations approved by the Delaware Department of Justice for consumer assistance, consumer education, credit and housing counseling, mediation programs, legal assistance, training, or staffing. If the payment is made by certified check, it shall be delivered to: Delaware Department of Justice Fraud Division, Consumer Protection Unit 820 N. French Street Wilmington, Delaware 19801 ATTN: Ian R. McConnel, Division Chief DISTRICT of COLUMBIA The payment for the District of Columbia shall be paid to the D.C. Treasurer in accordance with instructions provided by the Office of the Attorney General for the B2-4
District of Columbia. The payment shall be used by the District of Columbia Government, subject to appropriation, for one or more of the following purposes: (1) mortgage-related or foreclosure-related counseling, (2) mortgage-related or foreclosurerelated legal assistance or advocacy, (3) mortgage-related or foreclosure-related mediation, (4) outreach and/or assistance to help current and former homeowners secure the benefits for which they are eligible under mortgage-related or foreclosure-related settlements or judgments, (5) enforcement work in the area of financial fraud or consumer protection. FLORIDA Of the payment identified in Exhibit B-1 that Defendants are making to settle this matter with the Attorney General, State of Florida, Department of Legal Affairs, 10% is to be paid to the State of Florida as a penalty; the remainder shall be held in escrow by the escrow agent for subsequent disbursement as directed in writing by the Florida Attorney General for purposes consistent with Exhibit B, paragraph 1b(i) of this consent judgment GEORGIA The State Settlement Payment Amount to Georgia shall be paid to the state treasury to the credit of the general fund and shall be available for appropriation by the General Assembly for any purpose permitted by state law, including, to the extent practicable but not limited to, those 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, or to compensate Georgia for costs resulting from the alleged unlawful conduct of the Defendants. HAWAII The monies are to be held in trust for the benefit of homeowners and others in the State of Hawaii who are, have been, or may be affected by mortgage loan proceedings. This includes, but is not limited to, those who have been subject to foreclosure, are in foreclosure, are at risk of foreclosure, have delinquent mortgage loan payments, have negative equity in their homes, have lost their homes due to foreclosure, have been unable to refinance their mortgage loans, or are leasing a dwelling affected by foreclosure. The monies shall be used for housing and financial counseling, public education, mediation, dispute resolution, and enforcement of laws and agreements protecting the rights of homeowners and lessees. The monies shall be used only for these purposes. The monies shall be deposited into an administrative trust account to be administered by the Attorney General of the State of Hawaii, who as custodian shall have sole discretion to make determinations as to the amounts and the purposes for which the monies are to be expended.
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IDAHO Pursuant to Idaho Code 48-606(5), the money paid to the State of Idaho, as identified in Exhibit B-1 of the Consent Judgment, shall be remitted to the consumer protection fund. ILLINOIS The funds allocated to the Attorney General of Illinois shall be expended, in the sole discretion of the Attorney General, primarily for programs to avoid foreclosure and ameliorate the effects on homeowners of the foreclosure crisis, including without limitation, the funding of: legal assistance, housing counseling, administrative oversight for the funded programs by the Attorney General or others; to support law enforcement efforts to prevent and prosecute financial fraud or unfair and deceptive acts or practices; and for such other purposes as directed by the Attorney General. INDIANA Pursuant to the terms of the Consent Judgment entered into between the (a) United States of America and the State Parties; and (b) the Defendants, the State of Indiana will accept and use its cash payments identified in Exhibit B-1 as follows: 1. The cash payment shall be made to the Office of the Indiana Attorney General.
2. A portion of the cash payment will be used for existing and new programs of the Attorney General, including but not limited to: a. Consumer protection services and unfair and deceptive acts and practices investigations, enforcement, litigation, training, outreach, education, and related purposes. b. Homeowner protection services, investigations, enforcement, litigation, training, outreach, education, and related purposes regarding mortgage lending and foreclosures. c. Financial fraud protection services, investigations, enforcement, litigation, training, outreach, education, and related purposes. d. Education and training of counselors, facilitators, attorneys, investigators, and other stakeholders regarding the terms of the settlement. 3. To carry out the purposes of paragraph two (2), funds may be deposited in the following fund accounts and other related fund accounts as necessary: a. Homeowner Protection Unit Fund b. Consumer Fees and Settlements Fund B2-6
c. Identity Theft Unit Fund d. Real Estate Appraiser Licensing Fund e. Telephone Solicitation Fund f. Consumer Assistance Program Fund 4. A portion of the cash payment will be used for a combination of existing and new programs created or administered by the Indiana General Assembly and state executive branch agencies, including but not limited to: a. Housing counseling, foreclosure prevention, legal assistance, foreclosure mediation, victim assistance, and related purposes. b. Settlement conferences, court facilitator services, and related purposes. c. Land banks and related purposes. d. Homeowner and renter energy assistance programs such as the Lower Income Hoosier Energy Assistance Program, with priority given to homeowners. e. Workforce and job training programs to assist unemployed and underemployed state residents in increasing income to avoid foreclosure and obtain affordable housing. f. Neighborhood stabilization programs and community blight remediation programs. g. Law enforcement efforts and programs to prevent and address financial, consumer, mortgage lending, and mortgage foreclosure fraud. h. Foreclosure prevention and assistance programs for military service members and veterans. 5. The Attorney General may allocate and designate up to ten percent of the cash payment as a civil penalty or fine. 6. The Attorney General shall allocate the cash payment among the identified purposes at his discretion based on the terms of the settlement. IOWA The Escrow Agent shall distribute the funds according to written direction received from the Attorney General of Iowa. The payment shall be used, at the sole discretion of the B2-7
Attorney General of Iowa, for any use permitted by law or this Consent Judgment, including but not limited to: 1) 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 and unfair or deceptive acts or practices, and to compensate the State of Iowa for costs resulting from the alleged unlawful conduct of the Defendant. Such permissible purposes for allocation of the funds further include, but are not limited to, supplementing the amounts paid to homeowners under the Borrower Payment Fund, funding for housing counselors, state and local foreclosure assistance hotlines, state and local foreclosure mediation programs, legal assistance, housing remediation and anti-blight projects, funding for training and staffing of financial fraud or consumer protection enforcement efforts, and civil penalties. 2) Investigative and administrative costs in connection with the matters addressed herein, including costs incurred before and after the signing of this Consent Judgment. 3) Public education relating to consumer fraud, mortgage, housing and financial issues and for enforcement of Iowa Code section 714.16, as referenced in Iowa Code section 714.16A. 4) Any other lawful purpose. KANSAS The Kansas Attorney General shall dedicate not less than 25 percent of any cash payment to the State of Kansas for the following purposes: 1) supporting the Attorney Generals ongoing investigation and prosecution of suppliers in the housing and financial sectors who violate the law; 2) resolving consumer complaints filed with the Attorney General to prevent foreclosures and remedy mortgage servicing abuses suffered by Kansas consumers; and 3) defraying the investigative, administrative and consumer education costs associated with this settlement, including but not limited to the dedication of additional staff to monitor compliance with its terms. The remainder of any cash payment to the State of Kansas that is not dedicated to the above purposes shall be designated as a civil penalty and shall be deposited to the State General Fund for appropriation by the Legislature KENTUCKY The Office of the Attorney General for the Commonwealth of Kentucky (hereinafter, the Attorney General and "the Commonwealth," respectively) shall direct the payment of $19,198,220 to the Commonwealth in a manner consistent with the terms of the Consent Judgment to which this Exhibit B-2 refers, such that any funds distributed by the Attorney General shall be used for purposes intended to avoid preventable foreclosures, B2-8
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, to address the collateral consequences of such conduct, and to compensate the Commonwealth for costs resulting from the alleged unlawful conduct of the Defendants. Such payments shall include: i) $5,048,220 in agency restricted funds to directly compensate the Office of the Attorney General for the reasonable costs of investigation and litigation of the alleged unlawful conduct of the Defendants, and to finance, within the Office of the Attorney General, ongoing consumer protection actions including, but not limited to, actions addressing any conduct similar to the alleged unlawful conduct of the Defendants by any entity not released by the State Release contemporaneously executed with this Consent Judgment; any civil and criminal investigations emanating from any allegedly improper conduct not released pursuant to the State Release perpetrated by any Defendant or any other person or entity; investigations and potential litigation pertaining to MERS or any related entity involving mortgage assignments in the Commonwealth; and claims of fraud or improper conduct relating to the pooling of, marketing of, or sale of any securities product involving or containing mortgage related payment streams; and ii) $14,150,000 to be distributed at the express direction of the Attorney General to agencies, organizations or entities 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, to address the collateral consequences of such conduct, and to compensate the Commonwealth for costs resulting from the alleged unlawful conduct of the Defendants, including, but not limited to, the following: a. The Kentucky Housing Corporation, for purposes including, but not limited to, mortgage assistance to Kentucky homeowners, down payments and/or closing costs assistance for qualifying homebuyers, state and local foreclosure prevention and mediation programs, housing rehabilitation and anti-blight projects; b. The Kentucky Homeownership Protection Center, to provide homeownership and mortgage-related credit counseling to Kentucky consumers; c. The four federally-funded civil legal aid service organizations within the Commonwealth, to provide housing-related legal assistance to low income consumers; d. The Commonwealth's Unified Prosecutorial System (UPS), to support and sustain new and ongoing investigations and prosecutions relating to the foreclosure crisis and consequential criminal conduct plaguing local communities throughout the Commonwealth;
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e. The Commonwealth's Department of Financial Institutions ("DFI"), to assist in regulatory and educational efforts targeting financial services institutions subject to DFI's jurisdictional oversight, and consumers purchasing products and services from such institutions; f. The Commonwealths Department of Public Health, to support and maintain consumer safety and injury prevention programs, including but not limited to, lead abatement programs affecting low income individuals or communities; and g. Within the discretion of the Attorney General, any other organization or entity substantially able to implement, manage, develop or support any program consistent with the aims of this settlement. Funds directed to any agency, organization or entity by the Attorney General pursuant to the terms of this paragraph shall be appropriated, administered and expended consistent with the terms of KRS Chapter 48, as applicable. LOUISIANA Said payment shall be payable to the Louisiana Department of Justice Consumer Enforcement Fund and shall be used for investigation of mortgage and foreclosure matters, consumer protection law enforcement and education, litigation funds, public protection, reimbursement of costs and fees associated with the investigation of this matter, ensuring compliance under the terms of this agreement, federal, and state regulations, or for any other purpose, at the direction of the Attorney General, as permitted by state law. MARYLAND The settlement amount of $59,697,470.00 shall be paid for the benefit of the citizens of the State of Maryland, of which the maximum of 10%, or $5,969,747.00, shall be paid to the Office of the Attorney General of Maryland as a civil penalty to be deposited in the General Fund of the State of Maryland. The balance of $53,727,723.00 shall be held in trust pursuant to paragraph 1.b. of Exhibit B to the Consent Order, to be disbursed only as directed by the Office of the Attorney General of Maryland and to be used only for housing and foreclosure-relief purposes and for related investigations and enforcement activities. These purposes and activities may include, but are not limited to, the provision of housing counseling, legal assistance, criminal or civil investigations of fraud related to housing and the securitization of mortgage loans, enforcement activities, foreclosure prevention, foreclosure remediation, restitution, and programs to address community blight or to fund other programs reasonably targeted to benefit persons harmed by mortgage fraud.
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MASSACHUSETTS Payment to Massachusetts (the Payment) shall be payable to the Commonwealth of Massachusetts and directed to the Office of the Attorney General, and shall be used, consistent with this paragraph, to provide consumer and community relief to remedy the alleged unfair and deceptive acts and practices that gave rise to this Consent Decree, allocated as follows: a) $4.4 million shall be paid as a civil penalty pursuant to G.L. c. 93A, 4; b) $1.0 million shall be paid as costs and attorneys fees pursuant to G.L. c. 93A, 4; c) $1.5 million shall be used for the administration of the terms of this Consent Judgment, monitoring compliance with the terms of this Consent Judgment and enforcing the terms of this Consent Judgment, assisting in the implementation of the relief programs and servicing standards as described in this Consent Judgment, and supporting the Attorney Generals continuing investigation into misconduct in the origination, servicing, and securitization of residential mortgage loans; and d) the remainder of the Payment shall be used to establish the Consumer and Community Foreclosure Relief Fund (the Fund) which shall be used, in the sole discretion of the Attorney General, to fund or assist in funding programs intended to avoid preventable foreclosures, mitigate the effects of foreclosures on borrowers and communities, provide compensation to borrowers, other persons and communities arising out of alleged unfair or deceptive acts or practices that gave rise to the Consent Decree, and/or enhance law enforcement efforts to prevent and prosecute financial fraud or unfair or deceptive acts or practices. The Fund may further be used to provide consumer education, outreach, local consumer aid funds, consumer protection enforcement funds, and public protection funds or for other uses permitted by state law. MAINE Funds paid to the Maine Bureau of Consumer Credit Protection shall be deposited in the nonlapsing, dedicated account authorized to accept funds from any public or private source as described in 14 MRS 6112(4) to fund the Bureaus foreclosure prevention program. Amounts paid to the Maine Attorney General shall be used to fund foreclosure diversion programs including the Bureau of Consumer Credit Protections foreclosure prevention program and to legal aid organizations for direct legal services to consumers in support of foreclosure prevention efforts, to defray the costs of the inquiry leading hereto or for other uses permitted by state law at the sole discretion of the Attorney General
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MICHIGAN Payment shall be forwarded at the direction of the Michigan Attorney General. Said payment shall be used for attorneys fees and other costs of the inquiry leading hereto, and other uses as are consistent with state law and this consent judgment. MINNESOTA The State of Minnesota shall use the funds paid pursuant to Exhibit B-1 (Minnesota Direct Payment Funds) to provide restitution to Minnesota residents who were harmed by Defendants origination, servicing, or foreclosure practices. The Minnesota Direct Payment Funds shall be deposited into an interest-bearing escrow account. The reasonable expenses of the escrow account and for developing, administering, and implementing the restitution plan, including the expenses of settlement administration and independent claims review, may be paid with Minnesota Direct Payment Funds. After full and fair restitution has been paid to individuals harmed by Defendants practices as set forth above, any amount remaining shall be deposited into the State of Minnesota General Fund. Defendant shall provide to the settlement administrator retained by the Minnesota Attorney General to administer the Minnesota Direct Payment Funds (the Settlement Administrator) all information already in its possession and readily available that is reasonably necessary for the administration of the Minnesota Direct Payment Funds, within a reasonable time after receipt of the request for the information. Information pertaining to individual borrowers who may be eligible for payments under the Minnesota Direct Payment Funds, including names and other identifying information and information necessary to verify or corroborate claims for restitution of Minnesota borrowers, shall be provided to Minnesota so long as such information is used solely for the purpose of contacting eligible borrowers, responding to inquiries from borrowers regarding their eligibility for Minnesota Direct Payment Funds, and/or complying with tax reporting and withholding obligations, if any. Appropriate information security protocols, including prior borrower authorization where applicable, shall be utilized to ensure the privacy of borrower information and compliance with all applicable privacy laws. MISSISSIPPI The settlement payment for the State of Mississippi in the amount of $13,580.374.00 shall be distributed to the Mississippi Attorney General for disbursements in accordance with the terms of the Consent Judgment to which this Exhibit refers. MISSOURI The Escrow Agent shall pay $39,583,212 to the State of Missouri: a. $38,583,212 to the State of Missouri Office of the Attorney General and b. $1,000,000 to the state of Missouri Office of the Attorney General to the credit of the Merchandising Practices Revolving Fund for advocacy of consumers B2-12
impacted by the practices addressed in this Consent Judgment, for the investigation and prosecution of persons involved in unfair, deceptive and fraudulent practices related to financial services, and for such other purposes as authorized by law. MONTANA Pursuant to 1(b) of Exhibit B to the foregoing Consent Judgment, the sum of $4,858,276 shall be distributed to the state consumer protection account for the Montana Department of Justice, according to wire transfer instructions to be provided by the Montana Attorney Generals Office to the Trustee. The sum of $450,000 shall be for civil fines, costs and fees pursuant to Mont. Code Ann. 30-14-143. The remaining funds shall be used, at the sole discretion of the Attorney General of Montana, for purposes intended to avoid preventable foreclosures, to ameliorate the effects of the foreclosure crisis, and to enhance law enforcement efforts to prevent and prosecute financial fraud, or unfair or deceptive acts or practices. These purposes include but are not limited to, funding for housing counselors, state and local foreclosure assistance services, state and local foreclosure mediation programs, legal assistance, and funding for training and staffing of financial fraud or consumer protection enforcement efforts. NEBRASKA The Nebraska Attorney General, on behalf of the State of Nebraska, directs that Nebraskas portion of the Direct Payment Settlement Amount, pursuant to Exhibit B, Paragraph (1)(b) of the attached Consent Judgment, be distributed to the following, to be used for any purpose(s) allowed pursuant to said Consent Judgment: State of NebraskaCash Reserve Fund (11000). NEVADA Funds shall be directed to the Nevada Attorney General to be deposited into an account and used for the following purposes: avoiding preventable foreclosure, ameliorating the effects of the mortgage and foreclosure crisis in Nevada, enhance consumer protection and legal aid efforts, enhance consumer financial and housing counseling assistance including economic education and/or instruction on financial literacy for the benefit of Nevada residents, enhance law enforcement efforts to investigate, prosecute and prevent financial fraud or unfair or deceptive acts or practices at the sole discretion of the Attorney General. The aforementioned account shall be interest bearing and all accrued interest shall stay with the account for the above enumerated purposes. NEW HAMPSHIRE
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The funds received by the New Hampshire Attorney General pursuant to this agreement shall be deposited in the consumer escrow account at the Department of Justice and used at the sole discretion of the New Hampshire Attorney General for the protection of consumers in the State of New Hampshire. The permissible purposes for allocation of the funds include, but are not limited to, funding for housing counselors, state and local foreclosure assistance programs, state and local foreclosure mediation programs, legal assistance, funding for training and staffing of financial fraud and/or consumer protection enforcement efforts, supplementing the amounts paid to state homeowners under the Borrower Payment Fund, and civil penalties. NEW JERSEY New Jersey plans to apply its share of the settlement proceeds for its attorneys fees, investigation costs and other expenses related to the investigation and resolution of this matter as well as on one or more of the following programs: Affordable Housing, Local Planning Services, Developmental Disabilities Residential Services, State Rental Assistance Program, Homelessness Prevention, Shelter Assistance, Community Based Senior Programs, Mental Health Residential Programs, Social Services for the Homeless, and/or Temporary Assistance for Needy Families NEW YORK The State Payment Settlement Amount for New York, set forth in Exhibit B-1 to this Consent Judgment (New York Settlement), will be paid to the Office of the Attorney General of the State of New York (NYOAG) by certified check payable to the State of New York, Department of Law and deposited by the NYOAG in an account that may be used, as determined by the NYOAG, to address matters relating to housing, lending, mortgage defaults, foreclosures, or the mortgage crisis, including without limitation consumer assistance, investigation, enforcement operations, litigation, public protection, consumer education, or local consumer aid, and for penalties, costs, fees, or any other use permitted under law. The New York Settlement shall be disbursed by the NYOAG in its sole discretion and at its direction consistent with the terms of this Consent Judgment. The certified check shall be delivered to: New York State Office of the Attorney General 120 Broadway, 25th Floor New York, New York 10271-0332 Attn.: Scott Wilson, Senior Advisor and Special Counsel NEW MEXICO Funds allocated to the Attorney General of the State of New Mexico shall be expended, in the sole discretion of the Attorney General, primarily for programs to avoid preventable foreclosures and ameliorate the effects on homeowners of the foreclosure crisis, including without limitation, funding for housing counselors, establishment of a state foreclosure assistance hotline, state and local foreclosure mediation programs, legal B2-14
assistance for homeowners facing foreclosure, funding for administrative oversight for and coordination of funded programs by the Attorney General, and to enhance law enforcement efforts to prevent and prosecute financial fraud or unfair or deceptive acts or practices. NORTH CAROLINA For the payment of settlement funds pursuant to Paragraph III (3) of the Consent Judgment and in accordance with the provisions of Paragraph 1 (b) of Exhibit B to the Consent Judgment, North Carolina Attorney General Roy Cooper sets forth the following funding allocations for the State of North Carolinas settlement payment and directs the Escrow Agent to pay said funds as follows: $5.74 million to be allocated as civil penalties payable to the Civil Penalty and Forfeiture Fund pursuant to N.C. Gen. Stat. 115C-457.2 and Article 9, Section 7 of the North Carolina Constitution; $30.60 million to the North Carolina Housing Finance Agency for distribution as follows: (a) $19.12 million to be allocated to housing counseling providers to ensure that North Carolina homeowners receive the benefits due under this Consent Judgment, and to ensure the availability of homeownership and foreclosure prevention counseling services in North Carolina; (b) $11.47 million to be allocated to legal services providers in North Carolina for legal representation and assistance to North Carolinians in foreclosure or other housing or lending-related matters; $6.69 million to the Conference of District Attorneys of the North Carolina Administrative Office of the Courts to administer a program of grants among the prosecutorial districts in North Carolina for the purpose of expanding prosecution of lending and financial crimes, and expanding prosecution and investigative abilities in those areas, and obtaining training relating to lending and financial crimes; $2.87 million to the North Carolina State Bureau of Investigation to expand its accounting and financial investigative ability and its expertise to investigate financial and lending crimes; $4.78 million to the North Carolina Department of Justice to enable its Consumer Protection Division to hire attorneys, investigators, financial accountants and other specialists and staff as needed in order to increase its efforts to investigate and pursue cases related to financial fraud and unfair or deceptive trade practices in mortgage lending and financial services, and to assure public awareness of consumers eligibility for relief under the Consent Judgment and address consumer need for information;
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$8.6 million to the general fund of the State of North Carolina as compensation for costs and economic losses sustained by the State due to mortgage fraud and foreclosure misconduct. (It is anticipated that an additional $1 million will be paid to the general fund of the State of North Carolina in the form of attorneys fees.)
To the extent there are funds remaining or unallocated under the allocations set forth above, the Escrow Agent is directed to distribute such funds to the North Carolina Housing Finance Agency for it to distribute consistent with the purposes outlined above. If North Carolinas settlement payment amount is reduced for unanticipated reasons, the individual allocations set forth above will each be reduced by the corresponding percentage amount. NORTH DAKOTA The settlement payment to the State of North Dakota shall be paid to the North Dakota Attorney General, and shall be used, in the Attorney Generals discretion, to fund housing remediation projects designed to create more affordable and available housing or lodging in areas where more housing or lodging is needed, including creating available housing or lodging for personnel in law enforcement, emergency response, et cetera, and to compensate the state for attorneys fees and costs resulting from the alleged unlawful conduct of the Defendants. OHIO Ohios share of the Direct Payment Settlement Amount shall be distributed and delivered to the office of the Ohio Attorney General, and shall be placed in the following two funds: 1. $90,783,033.00 in the Attorney General Court Order Fund pursuant to section 109.111 of the Ohio Revised Code. The funds shall be transferred, distributed, disbursed, or allocated for the purposes described in Paragraph 1(b)(i) of Exhibit B of the Consent Judgment, including the costs of the Ohio Attorney General in administering this settlement and fund. Interest or other income earned on this account shall also be transferred, distributed, disbursed, or allocated for the purposes described in Paragraph 1(b)(i) of Exhibit B of the Consent Judgment and for the costs of the Ohio Attorney General in administering this settlement and fund. 2. $2,000,000.00 shall be placed in the Consumer Protection Enforcement Fund created pursuant to section 1345.51 of the Ohio Revised Code. The funds shall be used for the purposes described in section 1345.51. OREGON
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1.1 Payment. Servicers shall make available a total sum of Twenty-Nine Million Two Hundred Fifty-Three Thousand One Hundred Ninety Dollars ($29,253,190) for payment to the State of Oregon, allocated as follows: (a) Four Million Dollars ($4,000,000) shall be deposited into the Oregon Department of Justice Operating Account established pursuant to ORS 180.180. (b) Twenty-Five Million Two Hundred Fifty-Three Thousand One Hundred Ninety Dollars ($25,253,190) shall be deposited into the General Fund with a recommendation to the Oregon Legislative Assembly that such funds be used for housing and foreclosure relief and mitigation as set forth in this Consent Judgment. PENNSYLVANIA The Attorney General of the Commonwealth of Pennsylvania (Attorney General) directs that the State Payment Settlement Amount, as that term is used in Exhibit B of this Consent Judgment (Settlement Amount), be distributed to the Office of Attorney General, to be allocated by the Attorney General, at her sole discretion, to the Office of Attorney General and the Pennsylvania Department of Banking to further their respective educational and law enforcement purposes; and the balance to be allocated by the Attorney General, at her sole discretion, to appropriate programs that help Pennsylvania homeowners avoid foreclosure. The amount, timing, and manner of the allocation of the Settlement Amount shall be at the sole discretion of the Attorney General. RHODE ISLAND The Rhode Island Attorney General shall receive all state government designated funds paid under this agreement. Said funds shall be held in separate accounts and must be used solely for mortgage foreclosure related issues and/or consumer education, outreach, training or related consumer issues as determined by the Rhode Island Attorney General SOUTH CAROLINA With respect to the State of South Carolinas payment, said payment shall be used by the South Carolina Attorney General for a consumer protection enforcement fund, consumer education fund, consumer litigation fund, local consumer aid fund, or revolving fund; for consumer restitution, including the administrative costs thereof; for attorneys fees and other costs of investigation and litigation; for reimbursement of state agencies; for cy pres purposes; or for any other uses not prohibited by law. The South Carolina Attorney General shall have sole discretion over the distribution of the funds. SOUTH DAKOTA Said payment shall be used by the Attorneys General for attorney fees and other costs of investigation and litigation, or to be placed in, or applied to, the consumer protection B2-17
enforcement fund, consumer education or litigation, to defray the costs of the inquiry leading hereto, or may be used to fund or assist in funding housing counselor programs, foreclosure assistance personnel, foreclosure mediation programs, legal assistance and funding for training and staffing of financial fraud or consumer protection enforcement efforts, civil penalties or for other uses permitted by state law, at the sole discretion of the Attorney General TENNESSEE The settlement amount of $41,207,810.00 shall be paid for the benefit of the citizens of the State of Tennessee, of which the maximum of 10%, or $4,120,781.00, shall be paid to the general fund of the State of Tennessee as a civil penalty. The remaining $37,087,029.00 shall be paid to the Office of the Attorney General of Tennessee and shall be used for purposes consistent with applicable provisions of the consent judgment as directed by the Office of the Attorney General, including funding foreclosure prevention counseling, other housing and legal assistance programs, related compliance, investigative, enforcement, and education purposes, or to fund other programs reasonably targeted to housing or tenant issues. TEXAS Said payment to the State of Texas in the amount of One Hundred Thirty-Four Million, Six Hundred Twenty-Eight Thousand, Four Hundred Eighty-Nine Dollars ($134,628,489.00) shall be allocated as follows: A. Ten Million Dollars ($10,000,000.00) for civil penalties pursuant to Tex. Bus. & Com. Code 17.47(c) paid to the State of Texas for deposit to the judicial fund pursuant to Texas Government Code 402.007; B. One Hundred Twenty-Four Million, Six Hundred Twenty-Eight Thousand, Four Hundred Eighty-Nine Dollars ($124,628,489.00) paid to the State of Texas for deposit into the General Revenue Fund pursuant to Texas Government Code 404.094(b) and 404.097(c). UTAH The Attorney General of the State of Utah directs that the Utah portion of the State Payment Settlement Amounts, as that term is used in Exhibit B of this Consent Judgment, be distributed to the State of Utah to be further allocated as determined by the Utah State Legislature. VERMONT The state funds may be used for housing-related or other purposes. VIRGINIA B2-18
The State Payment Settlement Amount for Virginia totaling $66,525,233 shall be provided to the Virginia Attorney General for deposit to the Attorney General's Regulatory, Consumer Advocacy, Litigation and Enforcement Revolving Trust Fund (the "Revolving Fund"). Amounts deposited to the Revolving Fund may be used for costs of the Attorney General associated with his consumer protection advocacy and enforcement efforts and other delineated purposes permitted by State law. WASHINGTON The State of Washington will use its share of the State Payment Settlement Amount, as follows: 1. Ten percent will be designated as a civil penalty. 2. No more than $5 million will be used to compensate the State for its costs and fees to date, for costs of monitoring and enforcing the terms of the settlement, and for enforcing RCW 19.86, the Consumer Protection Act. 3. The remaining amount will be used for purposes intended to avoid preventable foreclosures or ameliorate the effects of the foreclosure crisis. As permitted by the Consent Judgment, such uses may include a. supplementing the amounts paid to state homeowners under the Borrower Payment Fund; b. funding for housing counselors; c. funding for state and local foreclosure assistance hotlines; d. funding for state and local foreclosure mediation programs; e. funding for civil legal assistance; or f. funding for housing remediation and anti-blight projects. The State of Washington will convene a committee of public and private stakeholders who are experienced in foreclosure assistance, mortgage lending, civil legal services or housing related issues to determine how best to use the funds. As required by the Consent Judgment, the Attorney General will exercise his discretion over the final disposition of the funds in accordance with the purposes as set forth in the Consent Judgment and will provide instructions to the Escrow Agent accordingly. WEST VIRGINIA
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Settlement payments to the State of West Virginia in the amount of $5,748,915.00 shall be placed in trust and used at the discretion of the Attorney General solely for consumer protection purposes, including but not limited to, direct payments, restitution, consumer education, legal services, credit or bankruptcy counseling and education, housing counseling, conflict resolution programs, and costs associated with implementing court orders. WISCONSIN Money owed to the State of Wisconsin shall be made payable to Attorney General, State of Wisconsin, and may be used for any purpose permitted under the Consent Judgment, as solely determined and directed by the Attorney General. WYOMING The Escrow Agent shall distribute the amount constituting the State Payment Settlement Amount for the State of Wyoming to the Attorney General of the State of Wyoming, as trustee, to hold and distribute such amount, pursuant to Wyoming Statute 9-1639(a)(i), exclusively for the purpose of addressing mortgage and foreclosure matters in the State of Wyoming, by providing grants or other aid to agencies and organizations approved by the Attorney General of the State of Wyoming for mortgage and housing related consumer assistance, consumer education, credit counseling, mediation programs, legal assistance, training, or staffing.
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EXHIBIT 2
2/17/2014
The state Department of Justice stood firm for... - Kamala D. Harris
FCamald D. Harris ey
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The state Department of Justice stood firm for over a year against the nation's largest banks on behalf of California homeowners harmed by the foreclosure crisis. This effort resulted in an agreement that will provide billions in relief to California homeowners who are experiencing hardship. The agreement also required the banks to pay an additional $410 million to get homeowners the expert help they need to keep their homes. The Governor's May Revision, however, proposes to redirect this $410 million from the state's homeowners to other budget purposes. While the state is undeniably facing a difficult budget gap, these funds should be used to help Californians stay in their homes. I plan to work with the Governor and Legislature toward a balanced budget that honors our obligations to California's homeowners.
Like Corrrnent Share May 14, 2012 at 9:43pm 195 people like this. 23 shares Lauren Massa-Lochridge Thank you Kamala for always standing up for what is right. May 14, 2012 at 9:44pm Like ~ 2 AI Doc Hannon II Thanks Kamala, you represent our beloved alma mater well!!! May 14, 2012 at 9:45pm' Like Maritha A Jones Just like redevebpement money was not meant to pay employees salary. That money is not meant to close a budget gap.. Handle your business Kamala -you didn't fight for that money to fix our budget woes so being the negotiator that you are I'm sure the money will be used for it's intended purpose at the end of the day..I have faith in your abilities to make it happen... May 14, 2012 at 9:47pm Like ~ 1 I~ancy Shaffer and how do we get banks who are holding the <~ mortgages to help us? rrry mortgage corrpany will NOT even consider helping me. i have been trying for 3 years to get them to help me so that i can keep rrry home. i am not asking that they reduce the rate, i a...
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May 14, 2012 at 9:54pm Like ~
~~ Claudia Schoedel Wish they'd helped me back in 2006 when I lost mine after getting injured by Otis Elevator's negligence. They have ~"` never paid a penny, and 3 different doctors have recomrriended 3 surgeries on hands, leg, back. Thanks, corporate plutocracy. NOT! May 14, 2012 at 9:58pm Like ~ 1 Patricia Aminisha Cunningham-Tambuzi Thanks, Kamala for standing strong and helping us. May 14, 2012 at 10:06pm Like Madan Ahluwalia Kudos! May 14, 2012 at 10:15pm Like Carmen Payne Sad this came so late in the game. Hundreds of thousands already lost their homes who shouldnt have. May 14, 2012 at 10:18pm Like 2 Chat(12) Jim Zampathas Money is for State Homeowners, they get money. May 14, 2012 at 10:32pm Like Bertha Leandro I hope they help those of us whose fraudulent loan documents were used to build cases against these white collar criminals. To date, our home loan documents have been used by the California Department of Justice two times in the last two years to win
... See More
May 14, 2012 at 10:36pm Like
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2/17/2014
Ivonete da Silva Kamala is powerfiul. Very...very powerful. Congratulations. May 14, 2012 at 10:41pm' Like Lanette White What about the ones who lost their homes? May 14, 2012 at 10:52pm Like Toni Giddings Thanks for putting up a good fight. The homeowners deserve that money the State needs to find another way to balance the Budget. May 14, 2012 at 10:58pm eke Sanjay Thekdi What can we (California) do to close loopholes that let banks like JP Morgan Chase make money losing $2B bets? May 14, 2012 at 11:00pm Like Justin Bailey My mom got her house foreclosed on in California and then ended up with an insane tax bill as a result. Insane. May 14, 2012 at 11:14pm' Like 1
Gregg Angulo Too late..... K. Harris May 14, 2012 at 11:42pm Like Ivan Guardia Kamala should make accountable all bank lenders don't willing to help home owners to save their homes from foreclosure.The Attorney General should Implement a Hot line for the homeowners to report all bank lenders don't comply with such assistance. May 15, 2012 at 12:03am' Like 1
~t
Ivan Guardia Wells Fargo latest victim http://networkedblogs.corr~/xDA4F Husband's Suicide Yesterday, Wells Fargo to Evict Wife Tomorrow Anyway networkedblogs.com it wces Forgc~w~e+,~ ova o~ txraness tonw~row. w,~d ar~yd us.ce3 You're a liar, Wells Fargo. Either you mew you weren't going to approve their ... See More
May 15, 2012 at 12:50am Like Ma' Lupe Don't let them pull an AZ stunt on you like the AZ AG! May 15, 2012 at 12:51am Like Chris Decamp Kamala, don't cave in now!! May 15, 2012 at 2:16am Like "' Wise Wishes thank kamala for bing such a good example. With in ,,~;, hope you will visit our broocking Farr~ly court, espically Marin, which turning our childern into the juvenals. May 15, 2012 at 10:36am Like Phil Ryan Kamala you're the best! May 15, 2012 at 12:46pm Like Nancy Counter My mortgage holder went out of business several years ago and somehow we ended up with a collector, Select Portfolio Servicing out of Florida. They avoid the question whenever we ask who owns our mortgage. The home is way upside down $214,000.
W2 tl'12d... See More
May 15, 2012 at l:lipm' Like Snjz EI STOP Foreclosures in California! Foreclosures are destroying farrilies! Banks are still getting richer off of homeowners. May 15, 2012 at 7:33pm Like 2 Marta Adint-Weeks Kamala Harris do not let Jerry Brown take money from homeowners to stay in their homes, that is unjust and must be Illegal. California is not Texas or Arona.... see Mope May 15, 2012 at 7:57pm Like
https://wv~rmi.facebookcom/KamalaHarris/posts/10151527733057923
Z3
2/17/2014
Marta Adint-Weeks Ps. The bill passed, during Governor Schwarzenegger, revoking taxpayers say on political salaries must be revoked as unconstitutional!!! Politicians should earn what their constituents want to pay them according to the job they do, nothing more. May 15, 2012 at 7:57pm Like 1 ~ Ivan Guardia I found a good article to share http://networkedblogs.conyxIYPr The Better Business Bureau,the State Bar, Loan Mods & Wwyers California networkedblogs.com
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Without question, that erroneous statement made by the Bar's president continues... See More May 17, 2012 at 11:14am Like Kevin Gibbs And here you have won. extremely well. May 19, 2012 at 4:23pm' Like Mitchell McAleer coulda shoulda woulda, you're talking and doing nothing. Californians have lost their homes in record numbers since 2007 and you haven't done anything but talk. Get a real job, stop being a useless burden on the taxpayers of this state. We don't nee...
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May 20, 2012 at 1:17am Like
Win Aker What is happening to help homeowners with qualified hardships -job layoff and new income 60% less than prior income. SOFA representative lied to us(JAN 2009) by stating that we had to be behind on our payments in order to qualify for ANY loan rradific...
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June 8, 2012 at 4:27pm Like
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EXHIBIT 3
Department of Finance STATE OF CALIFORNIA MANUAL OF STATE FUNDS Legal Title National Mortgage Special Deposit Fund Legal Citation/Authority Chapter 32, Statutes of 2012 (SB 1006) Government Code section 12531(b) Fund Classification GAAP Basis Fiduciary Funds/Agency Funds
Fund: 8071 PAGE 1 Renumbered From:
Fund Classification Legal Basis Nongovernmental/Trust and Agency FundsNon-Federal
Purpose The Californias share from the National Mortgage Settlement agreement will be used to offset General Fund expenditures in the 2011-12, 2012-13, and 2013-14 fiscal years. Not less than 30 days prior to allocating any moneys, the Department of Finance shall submit an expenditure plan to the Joint Legislative Budget Committee detailing the proposed use of the moneys. Administering Agency/Organization Code Department of Justice/Org 0820 Major Revenue Source Direct payments made to the State of California pursuant to the National Mortgage Settlement, except for those payments made pursuant to Government Code section 12531(c). Disposition of Fund (upon abolishment) Pursuant to Government Code section 16346, in the absence of language that identifies a successor fund, any balance remaining in this fund upon abolishment, shall be transferred to the General Fund. Appropriation Authority Continuously appropriated. State Appropriations Limit Always Excluded Revenues in this fund are not proceeds of taxes and even after transfer, will never become proceeds of taxes because the major revenue source is derived from a Trust and Agency Fund. Comments/Historical Information
New September 2012
FUND 8071
EXHIBIT 4
November 27, 2013 Governor Jerry Brown State Capitol, Suite 1173 Sacramento, CA 95814 SENT VIA EMAIL
$410 Million in Homeowner Foreclosure Funds Should Be Returned Based on Large State Surplus Dear Governor Brown, In early 2012, Attorney General Kamala Harris negotiated a very successfully settlement. As part of the settlement, she secured $410 million intended to help 2.2 million California homeowners in distress prevent foreclosures and secure appropriate loan modifications. Due to the looming budget crisis at the time, your office determined to take the money from homeowners in distress and instead help balance the budget. Our organization and many other nonprofits oppose this, as did Attorney General Kamala Harris. We sought to secure the return of this $410 million for Attorney General Kamala Harriss housing fund. In light of the state legislatures nonpartisan budget analysis, there is no longer a need to retain these $410 million. Specifically, it is forecasted that the State of California will have a surplus of $2.4 billion by June of 2014 and $5.6 billion by June 2015. Further, it is predicted that the States reserves will continue to grow to $10 billion by June of 2018.1 In light of the changes in the states financial situation, many of which have occurred as a result of your strong and committed efforts to raise taxes and balance the budget, we urge that you personally take the required efforts to return the $410 million to Attorney General Kamala Harriss housing fund as quickly as possible. The goal should be to return the funds to Attorney General Kamala Harris by Dr. Kings birthday, January 13 th, 2013. We wish you a very successful Thanksgiving and Happy Holiday season. We also request that you provide the appropriate Christmas gift to our states two million homeowners in distress, a large number of whom face foreclosure and could benefit from appropriate loan modifications. Please provide a true Christmas gift to our States two million homeowners. Most respectfully,
Faith Bautista President & CEO National Asian American Coalition Cc: Attorney General Kamala Harris, President pro Tem Darrell Steinberg, Speaker John Perez and appropriate legislative members of budget and banking committees
1
Please see, for example, Big State Budget Surplus Forecast, San Francisco Chronicle 11-21-13.
15 Southgate Avenue, Suite 200 Daly City, CA 94015 Office (650) 952-0522 | Fax (650) 952-0530 | www.naacoalition.org
EXHIBIT 5
December 5, 2013 Governor Jerry Brown State Capitol, Suite 1173 Sacramento, CA 95814 SENT VIA EMAIL
Follow Up: $410 Million in Homeowner Foreclosure Funds Should Be Returned Based on Large State Surplus Dear Governor Brown,
On November 27th, we sent to you the attached letter, requesting in light of the States $2.4 billion surplus, the $410 million your office took from Attorney General Kamala Harriss housing fund be promptly returned to the Attorney General. The Attorney General could then use the $410 million to help homeowners in distress consistent with her very successful settlement with five major banks in 2012. We would greatly appreciate it if we could discuss this matter with you and your most senior staff by next week. Our goal should be to resolve this matter without need for any further legal actions
Most respectfully,
Faith Bautista President & CEO National Asian American Coalition
Cc: Attorney General Kamala Harris, President pro Tem Darrell Steinberg, Speaker John Perez
15 Southgate Avenue, Suite 200 Daly City, CA 94015 Office (650) 952-0522 | Fax (650) 952-0530 | www.naacoalition.org

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PARTIES Petitioner National Asian American Coalition (NAAC) is a California-based, Section

Petitioner National Hispanic Christian Leadership Conference (NHCLC) is a

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ii. The Federal Payment Settlement Amount includes resolution of the

The state Department of Justice stood firm for... - Kamala D. Harris

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The state Department of Justice stood firm for... - Kamala D. Harris

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Fund: 8071 PAGE 1 Renumbered From:

Fund Classification Legal Basis Nongovernmental/Trust and Agency FundsNon-Federal

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Faith Bautista President & CEO National Asian American Coalition

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