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Newsom steers $331 million to renters, homeowners after court says state misused funds

After California’s top court determined the state misspent $331 million intended to help homeowners, Gov. Gavin Newsom announced a plan Wednesday to channel the money through nonprofit organizations to help homeowners and renters navigate housing issues.

State lawmakers will need to approve the plan to spend the money California secured from banks in 2012 through a lawsuit over unfair mortgage practices. Newsom’s blueprint would dole out the money to housing-related nonprofits to help Californians avoid evictions and foreclosures.

Overall, California received roughly $20 billion from Bank of America, Citigroup, JPMorgan Chase, Wells Fargo and Ally Financial in the 2012 national mortgage settlement. Much of that money went directly to homeowners.

State government received $410 million and initially set aside $331 million to educate homeowners and give them legal help. But instead, then-Gov. Jerry Brown and the Legislature spent most of the money paying off state debts from housing bonds.

The National Asian American Coalition and other groups sued the Brown and Newsom administrations, arguing the state misused the money. Newsom and Brown fought them in court, but last month the California Supreme Court sided with the coalition and validated an appellate court ruling that the state needs to use the money to help homeowners.

Faith Bautista, president and CEO of the National Asian American Coalition, said Newsom’s plan appears to be in compliance with that ruling. But she said Newsom’s team did not include her organization, which helps homeowners avoid foreclosures, when it drafted the plan and that worries her.

Without input from organizations like hers that are out in the community helping Californians, she worries the money will be misused again. She pointed out that the Newsom administration has been fighting her nonprofit in court to avoid using the money to help homeowners.

“How sure are we that they will be helped when you stole that money from us before, you waited five years?” she said. “What we’re really praying is that they include us... They don’t have the pulse of the people.”

Newsom’s office said it doesn’t yet have details about how renters and homeowners will be able to access the money, and he hasn’t named the nonprofits that will receive the money. But he says his plan will put the state in compliance with the ruling.

“Families facing eviction and foreclosure should know their rights and have legal advocates who can fight on their behalf — especially at this moment when Californians are grappling with sky-high rents and huge housing costs,” Newsom said in a statement. “I look forward to working with the Legislature to move these important protections forward.”

The Assembly Republican caucus, which has urged Newsom to spend the money on homeowners for months, is pleased with what the governor has announced so far, said spokesman Jim Stanley.

“We’re pretty thrilled that the governor finally listened to our calls to help struggling homeowners, but we’re disappointed that it took six years,” he said.

The state already provides some grant funding for groups that provide free legal services in every California county, including aid for renters. In his first state budget, Newsom added $20 million to boost legal aid for renters, but the state hasn’t yet distributed the money.

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Sophia Bollag covers California politics and government. Before joining The Bee, she reported in Sacramento for the Associated Press and the Los Angeles Times. She grew up in California and is a graduate of Northwestern University.
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