Lawyers challenge Arizona's sweep of mortgage settlement money

May 08, 2012

Arizona’s attorney general will likely face legal action over part of the state’s recently approved budget. 

Earlier this year, Arizona received a billion dollar settlement as part of a national suit against five major banks for improper mortgage practices. The money is supposed to help struggling homeowners. But the state’s budget for the upcoming fiscal year sweeps $50 million from the settlement into the state’s general fund.

On Tuesday, lawyers representing a Mesa homeowner sent a letter to Attorney General Tom Horne warning him not to transfer the money. Horne, who is the settlement fund’s trustee, said he agrees the money should help keep people in their houses, "but the governor and the legislature made a different decision. I disagreed with it, but as the lawyer for the state I will defend it because the governor and the legislature are the people chosen by the voters under our constitution to make budgetary decisions."

"That sounds like waffling to me," said Tim Hogan, Executive Director of the Arizona Center for Law in the Public Interest and one of the lawyers challenging Horne.

"I think the Attorney General’s office understands that the legislature can’t require the Attorney General to do this," Hogan said. "These aren’t state funds subject to appropriations. They’re in a court ordered trust fund, and the legislature has no authority over that court ordered trust fund."

Hogan says once the money is in the general fund, it will be hard to recover. Attorney General Horne says he’ll transfer the money on July 1, the start of the new fiscal year. Hogan plans to take action in court ahead of that date.

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