Mortgage deal cash is divvied About half of the $410 million flowing into California's coffers from the national mortgage settlement with major banks will be pumped into the state's housing counselors and legal services agencies that help struggling homeowners. The funding is part of the plans disclosed Friday by state Atty. Gen. Kamala D. Harris for distributing the cash. Harris, who helped negotiate the agreement with the nation's five biggest banks, said she also plans to spend the rest of the money on reaching out to and educating homeowners stuck in the hardest-hit parts of the state; on further investigations and oversight of the settlement funds; and on helping borrowers who can't stay in their homes. "Homeowners who receive meaningful counseling are far more likely to avoid foreclosure," said Shum Preston, a spokesman for Harris. The cash the state received is part of $3.5 billion in total cash payments made to 49 states in the overall settlement with five of the nation's biggest banks. The global settlement of accusations that the banks improperly or fraudulently foreclosed on homeowners provides $25 billion in aid to struggling borrowers. "There are over half a million California households currently in the foreclosure pipeline, so we understand the importance of getting these funds into the communities where they're needed and to the homeowners most affected by this crisis," Preston said. Community organizer Peggy Mears at the Alliance of Californians for Community Empowerment said funds need to go to African American and Latino families first because they were the hardest hit by the foreclosure crisis. Mears said the money needed to go toward helping homeowners, not to filling the state's budget deficit, as it has in other states. "We need the highest levels of accountability for this money," she said. This settlement was for homeowners who were dealing with the foreclosure crisis. Housing counseling agencies across the U.S. have struggled in the face of the crisis, just as demand for their services has gone up. The tough economy and a more competitive environment for nonprofits have hit counselors who provide foreclosure counseling, said Anna Lisa Biason, director of fund development for Neighborhood Housing Services of Orange County. Counselors assist the borrowers who apply for the alphabet soup of federal and statewide programs available for them. Groups that advocate on behalf of homeowners in the state generally praised the planned use of the funds. "Our concern has been that the funds would be used to help mitigate the effects of the crisis, and where that is possible, help people stay in their homes," said Kevin Stein, director of the California Reinvestment Coalition. All those pieces seem really important so that the agreement actually be enforced. A recent coalition survey of more than 70 housing counseling agencies in California found that 75% of them expect demand for their services to increase this year, while more than a third expect to have to cut back because of funding shortages. "Demand is so strong, we are very excited to have money from this state AG settlement," said Douglas Robinson, a spokesman for Neighborworks America, a national housing counseling association that has a number of branches in California. California is one of the hardest-hit states. Salena Copeland, directing attorney for the Legal Aid Assn. of California, said that legal-aid lawyers who take cases for low-income borrowers have lost major funding sources. "There is a huge number of Californians living in poverty," Copeland said. Having any funding at all to help support this critical safety net is very important. Patrick Dunlevy, directing attorney of Public Counsel's Consumer Law Project, said the anticipated funding would be a big help. "Housing counselors and legal services groups are in the best position to assess whether homeowners qualify for a loan modification and assist them in applying for one," he said. And legal services groups are in the best position to help middle-income families that have a legitimate basis for stopping a foreclosure remain in their homes. Taking into account a complex series of credits designed to encourage the banks to make payments to homeowners, California's share of the settlement is expected to climb to as much as $18 billion. About $8.9 billion will be used for principal write-downs for 250,000 troubled homeowners; $3.5 billion for forgiving missed mortgage payments and penalties for 32,000 borrowers; and $3.1 billion for forgiving debt of 23,000 borrowers who will be allowed to sell their homes for less than the mortgage amount.