By Kyla Asbury | Jul 17, 2018

SACRAMENTO — A California appellate court ordered the return of more than $330 million to the National Mortgage Settlement (NMS) Deposit Fund after finding state officials unlawfully used the money for the state's general fund.

In the July 10 order, the Third District Court of Appeals ruled the plaintiffs, which included the National Asian American Coalition, COR  Community Development Corporation and the National Hispanic Christian Leadership Conference, have a public interest in the matter. The court directed the lower court to issue the mandate returning the funds.

The fund was created after 49 state attorney generals brought a lawsuit against the five biggest mortgage servicers for violating federal laws during the 2007 financial crisis. The money was supposed to be used to prevent foreclosures and enforce state laws against unfair business practices. 

In an opinion authored by Justice Andrea Lynn Hoch, and joined by Justices Vance W. Raye and Harry E. Hull Jr., the court ruled that the money was unlawfully diverted from the NMS Deposit Fund.

"The trial court also correctly concluded over $331 million was unlawfully appropriated from the NMS Deposit Fund for purposes inconsistent with the NMS," Hoch wrote. The appellate court ruled that the sum of $331,044,084 should be returned to the NMS Deposit Fund.

Third Appellate District Court of Appeal of the State of California Case number: C079835

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