Judge rules California owes $331 million to homeowners

SAN FRANCISCO (Reuters) - A California judge has ruled the state is obligated to pay $331 million in mortgage relief funds it used to bolster its finances, but stopped short of ordering that the money be turned over to homeowners hard hit by the mortgage and foreclosure crisis.

California Governor Jerry Brown waits to speak during a news conference at the State Capitol in Sacramento, California March 19, 2015, to announce a $1 billion emergency legislative package to deal with the state's devastating, multiyear drought. REUTERS/Max Whittaker

Instead, Judge Timothy Frawley of Sacramento County Superior Court in his ruling on Friday said it is up to Governor Jerry Brown and lawmakers to come up with a plan to return $331 million that was part of the $25 billion National Mortgage Settlement of 2012 when the state has money available to do so.

Robert Gnaizda, general counsel for the three groups that brought the lawsuit, said now that California’s budget has swung to a surplus and Brown and lawmakers are debating what to do with it, the state is in position to begin making payments.

“We would be happy to work with the governor on a distribution schedule,” Gnaizda said, adding that Frawley’s ruling could spur other states that also held on to their proceeds from the settlement to release the money.

Gnaizda said groups that sued California over the funds are seeking meetings with Brown and top Democrats and Republicans in the state Senate and Assembly on how to move forward with payments.

It is not clear if that would be swept up into budget talks that are under way between Brown and lawmakers, Gnaizda said.

Brown’s fellow Democrats control the Senate and Assembly but have been at odds with the governor over how much the state sets aside for spending in its budget for its next fiscal year. With the state’s revenue exceeding expectations, they want to spend more than the governor does.

H.D. Palmer, spokesman for California’s Department of Finance, said Brown’s administration has not decided whether it will appeal Frawley’s decision.

“Our legal team is still reviewing it to determine the legal implications, the fiscal implications and what the next steps are going to be,” Palmer said.

The case is National Asian American Coalition et al v. Edmund Gerald “Jerry” Brown Jr, Governor, et al, Case No. 34-2014-80001784, in Superior Court of California, County of Sacramento

Reporting by Jim Christie; Additional reporting by Rory Carroll in San Francisco; Editing by Leslie Adler