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By BVN Staff Report

When Governor Jerry Brown released his revised budget proposal two weeks ago press coverage centered on his proposal for more cuts, tax hikes, and numbers showing that California’s budget deficit is nearly $6 billion more than he projected in January.

But as the placard of a protester staging a rally against home foreclosures outside the Capitol in Sacramento read: “The devil is in the details”.

Little did he know, hundreds of millions of dollars meant to provide relief to California’s struggling homeowners is instead being diverted to close the state’s ballooning budget gap.

The money earmarked for foreclosure prevention was part of a national bank settlement valued at $25 billion. California was awarded $400 million from the payout negotiated with five big banks accused of defrauding homeowners. Gov. Brown has proposed using the bulk of the state’s share to plug the budget and pay other state debts.

According to published reports Shaun Donovan, the federal housing secretary, has been privately urging states to use the money for its intended use.

“Unintended uses fail to capitalize on the opportunities presented by the settlement to bring real, concerted relief to homeowners and communities in which they live,” he said.

The governor’s move and resulting national publicity has put California Attorney General Kamala Harris in an awkward position. Ms. Harris worked for well over a year to reach an acceptable settlement with banks that had harmed California homeowners with robo-signing and other mortgage servicing abuses. So far, 27 states are using the settlement only as intended.

“While the state is undeniably facing a difficult budget gap, these funds should be used to help Californians stay in their homes,” Ms. Harris said in a statement. She had promised to distribute half of the funds to housing assistance groups. The other half was designated for investigation of mortgage-related crime.

“California needs every dime it can get to balance its budget. But mortgage settlement funds should be off limits,” The Center for Responsible Lending said in a statement. Using the money for something other than homeowner relief adds insult to injury, several housing and civil rights groups warned.

“African Americans and Latinos were targeted by big banks – seems its big government’s chance to spin for green on the wheel of deceptive practices,” said an angry protester.

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