Los Angeles, California - Today, California Governor Gavin Newsom announced a proposal to create a new permanent fund that would provide legal assistance for struggling California renters and homeowners each year.
In June, Governor Newsom secured an additional $20 million in legal assistance to help California renters fight unjust evictions through passage of the 2019-2020 state budget. Today’s proposal builds on that investment and the success of the National Mortgage Settlement to create a permanent fund to provide free legal assistance to Californians who are at risk of losing their homes.
“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,” said Governor Newsom. “This proposal builds on the investments made in the budget to provide legal assistance to renters and carries forward the important work that Senator Kamala Harris and Congresswoman Katie Porter undertook during the National Mortgage Settlement, a process that provided relief and legal assistance to struggling California homeowners. I look forward to working with the Legislature to move these important protections forward.”
Congresswoman Katie Porter, who was appointed by then Attorney General Harris to oversee California’s portion of the National Mortgage Settlement following the 2008 financial crisis, praised the proposal.
“During the National Mortgage Settlement, it was my job to make sure the nation’s five largest banks kept their promises to struggling California homeowners during the foreclosure crisis. At nearly every turn, these banks – the world’s largest financial institutions – tried to skirt their responsibilities to California families, drowning homeowners in unnecessary paperwork and inventing false reasons to avoid their legal duty to help homeowners. My team fought the banks, listening to and advocating for Californians who showed us over and over that the banks’ behavior did not match their CEOs’ press statements. We assisted hundreds of thousands of families – from helping save homes from foreclosure to reducing families’ loan balances to simply providing honest answers about homeowners’ options. But the process underscored just how important it is for families - especially those struggling to keep a roof over their heads - to understand their rights and have legal advocates who can fight on their behalf. I applaud Governor Newsom for this proposal that carries on the spirit of our important work.”
Pursuant to the National Mortgage Settlement, the Governor is proposing that the state draw on mortgage settlement funds to provide a new, sustainable, ongoing source of funding for legal aid for renters and homeowners through local nonprofits.
Under the plan and with the Legislature’s approval, California would deposit $331 million into a trust for nonprofits to provide legal aid for preventing foreclosures via borrower relief and assisting housing counselors or other legal aid agencies that represent renters in housing-related matters.
Currently, the Judicial Council provides grants to 100-plus legal service projects and support centers that offer services including: pre-eviction and eviction legal services, counseling, advice and consultation, mediation, training, renter education and representation.
Funds distributed by the trust would provide a reliable source of ongoing funding for free legal services for renters and homeowners facing foreclosure. This includes legal assistance for counseling, renter and homeowner education programs and preventing evictions and foreclosures.
In 2012, the federal government and 49 states settled with the nation’s five largest mortgage servicers related to the actions of those servicers in the 2008 subprime mortgage crisis.
The National Mortgage Settlement provided more than $20 billion in financial relief for consumers and $2.5 billion directly to states. California's share was $410.6 million.
The settlement provided for various uses of the funds, including to assist in the implementation of relief programs and servicing standards, and provide borrower relief and grant programs to assist legal aid agencies that represent homeowners, former homeowners and renters in housing-related matters.
This year, a state appellate court issued an opinion on the use of $331 million in settlement funds. This plan, if approved by the Legislature, would bring the state into compliance with that opinion.