Mortgage Giant Countrywide Being Sued For Foreclosure Lapses
July 10th, 2008
The Bank of America is buying off Countrywide but meanwhile it is being sued by three states for foreclosure lapses. California, Illinois and Washington Attorney Generals took the step of filing lawsuits against Countrywide on Tuesday. The bodies that regulate financial institutes in all three states alleged that Countrywide had indulged in fraudulent mortgage practices.
An article in Wall Street Journal written by the Attorney General of California, Edmund G. Brown said that Countrywide undertook “misleading marketing practices” to peddle unsuitable loans to borrowers for buying houses. This inevitably led to foreclosures. Countrywide was interested in boosting market shares and meet the demands of investment bankers for loans that were made into securities. The California suit specifically brings charges against the chairperson of Countrywide Angelo Mozilo as well as the president of the firm, David Sambol.
It was also alleged in the suit that Countrywide was lax in its underwriting standards and thus exceptions were granted to even more loose standards. “The company’s Structured Loan Desk in Plano, Texas, was specifically set up” as per the directions of Mozilo and Sambol to grant underwriting exceptions. In 2006 it rushed through 15,000 to about 20,000 loans in a month.
Lisa Madigan of Attorney General of Illinois charged Countrywide for unjust and fraudulent practices while offering house loans. Inevitably it leads to foreclosures.
The State of Washington charged Countrywide for making discriminations in granting loans. This has led to one section of the community being more affected by foreclosures than others.
All the three states want the borrowers to be compensated for the loss. Kurt Eggert, law professor of Chapman University said that if the courts granted restitution then it would be a “staggering blow” to Countrywide. The latter would be then forced to return its profits and perhaps also the foreclosed houses that made these profits possible.
Apart from these three lawsuits Countrywide is facing other legal problems. The FBI, the Securities and Exchange Commission and some other federal departments are investigating lapses on the part of the firm as well as its top brass. Many employees, shareholders and borrowers have started to take legal action against Countrywide.
All this brings into question the role of Bank of America in purchasing Countrywide. It will have to face $9 billion in write-downs. Kenneth D. Lewis of Bank of America opines that all things have been taken into consideration so that that there is plenty of space to move and make the deal viable despite negative pressures.
- Bouncing Cheques Issued by Title Companies Lead to Foreclosures
- Increase in Foreclosures Prompting Class Action Legal Suits
- Avoiding Foreclosures by Walking Away From Loans are not Without Problems
- Foreclosure Assistance Being Taken on Tour by Housing Advocate
- Washington Mutual, the Symbol of the Foreclosure Crisis, Continues to be in Trouble
- The Consequences of not Paying Mortgages Can be Grim
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