Challenge to use of mortgage settlement rejected - CBS 5 - KPHO

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Challenge to use of mortgage settlement rejected

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PHOENIX (CBS5) -

A judge has rejected a challenge to Arizona's use of $50 million of its share of a multistate foreclosure settlement to help balance the state budget.

The ruling released Wednesday grants the state's motion to dismiss a lawsuit challenging how the state is using some of the settlement money paid by lenders. [Click here to read the judge's ruling (PDF)]

Judge Mark Brain of the Maricopa County Superior Court rejected housing advocates' argument that the state attorney general could decide how the money is used. The judge said the attorney general doesn't have that power and that the Legislature decides how to spend the state's money.

In his ruling, the judge wrote, "Having fully considered the matter, the Court concludes that the Legislature had the right to do what it in fact did - direct $50 million of the settlement to be put into the general fund so that it could be spent as directed by the Legislature."

Critics of the Legislature's decision to put $50 million of the settlement money into the general state budget wanted the money to be used for programs and services benefiting borrowers and troubled homeowners.

The Arizona Attorney Generals Office said in the wake of the ruling that Arizona received $97,784,204 in State Payment Funds. The Legislature swept $50 million (SB 1523). On Sept. 24, the attorney general announced plans for allocating the remaining approximately $47 million (plus $10 million from the Bank of America settlement) for the benefit of Arizona consumers.

The ruling sparked other reaction. Arizona Housing Alliance said the court decision ignored the needs of foreclosed homeowners.

"The Arizona Housing Alliance is not as concerned with who spends the settlement fund as how it is spent," said Valerie Iverson, executive director. "The settlement agreement specifies that the state's payment should be used to address the foreclosure crisis and prevent future foreclosures. Dumping $50 million into the state general fund accomplishes neither of these goals."

Copyright 2012 CBS 5 (Meredith Corporation). All rights reserved. The Associated Press contributed to this report.

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