Bloomberg reports California and Illinois sued Countrywide Financial and its CEO Angelo Mozilo today for allegedly luring borrowers into risky loans they couldn’t afford.
The suits claim the lender’s tactics led thousands of borrowers to lose their homes when they couldn’t make their payments. Here’s more from Bloomberg:
Countrywide used deceptive practices, including low “teaser” rates, to entice borrowers into adjustable-rate loans without adequately informing them that the payments would balloon in later months, according to the suits.
The lawsuits were filed the same day Countrywide’s shareholders approved Bank of America Corp.’s $3 billion takeover offer, clearing the way for the lender’s bailout. Washington Governor Christine Gregoire also plans to fine Calabasas, California-based Countrywide for allegedly discriminating against minority borrowers, according to a statement today.
The legal action “isn’t the one thing that is going to change the deal,” said Stuart Plesser, an analyst at Standard & Poor’s Corp. who advises selling Bank of America shares. “It seems that whatever they throw at BofA, they are going ahead with this deal.”
Bloomberg said Rick Simon, a spokesman for Countrywide, didn’t immediately return a call seeking comment, and Scott Silvestri, a Bank of America spokesman, declined to comment.
To read the story, CLICK HERE.
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- Is Sambol leaving or getting pushed out at Countrywide?
- Bank of America should ‘walk away’ from Countrywide, analysts say
- Greenlining protests BofA/Countrywide combo
- Psst! Wanna million-buck foreclosure?
- Schwarzenegger, servicers agree to ‘fast-track’ subprime workouts
Before this real estate bubble is fully crashed, we will witness lots of law suits…….after all, somebody is to blame. It certainly was not the people that signed up for the loan. Maybe we will even see the NAR, PV, and GW get sued for lying and saying that there is such a thing as a financial perpetual motion machine.
nanowest,
I’d have to disagree. Both borrowers and lenders are to blame with this mess. We’re talking about the biggest purchase most people will make in their lifetime and they chose to not do their homework when borrowing hundreds of thousands of dollars.
Of course, I’m not taking anything away from the lenders either. They encouraged the reckless borrowing and now it’s payback time. Besides, it’s easier to place blame on Wall Street than a family who made a financial “mistake”.
Unless there was fraud on the part of the lender, it is the borrowers fault……when you borrow money for a home, you better read the fine print. You better read the disclosures, you better tell the truth on the application.
They’re all just jealous of that cool Mozillo tan. : P
Here’s what I don’t get though… Why in the world would BofA shareholders approve this deal? There is absolutely no value for them. The name Countrywide has been blemished beyond repair and would be on par with opening a new mortgage firm named New Century. They must have their sights set on the servicing portfolio and the fees that generates, but in all honesty you still need performing loans to make that profitable. Seems to me the downside risk far outways the benefits. Then again, maybe this is the only way BofA can expand due to the restrictions on how large banks can grow.
Nanowest - are you kidding. Fraud on the lender side, broker side, appraiser and borrower was rampant. There is simply no responsibility for anyone except the borrower. Stocks, bonds, options, life insurance, even car purchases have more recourse protections than buying a house with a loan. I am personally aware of blatant broker fraud.
When you ask someone to lie about an applicants job, salary and time at the job, you are committing fraud and as a broker you know better and as a borrower you are also worng but this is not a one-way street.
Most borrowers were “in on it”. However, I do believe that there were some borrowers who were truly clueless. Many non-English speaking borrowers in construction were taken advantage of by smooth talking agents and brokers, but these are a small number compared to the borrowers “in the know”.
Mazilo’s left nut are you kidding, Bof A is getting a killer deal at cut rate prices. Countrywides infustructure is 10 times better then BofA, their technology is ahead of them. When a company is buying another company its not always about the companies name. Why do you think the Countrywide name is going away.
Here is something else to think about BofA is going to bust their but to fix all these bad loans, What kind of price do you think that will have in kudos points in the press?
4billion dollars is like a steal for them. There are so many different reasons BofA deal is in the best interest of Bof A stock holders. It might not be evident at the moment but give it a few years. Once the market stabilizes B of A will be the biggest Mort lender in the USA.
Also you are conveniently forgetting about the many many borrowers that lied deliberately just so they could qualify, or those borrowers that said I don’t care what the rate is I want this home. Or those that pulled all the equity out of their home. Borrowers are just as to blame as the mortgage companies. Unfair lending practices? Yeah if people don’t READ what they are signing. While there is some fraud, one thing I will say is the govt has a hand in the blame for this mess, what did Bush say to put home ownership with the reach of every American, did that include those that cant afford to buy a home?
To many variables and Countrywide is the chosen poster child for the blame game.
I wonder how many lawsuits are out there that we don’t hear about.
Oh and sorry but if you cant read and speak English you have no reason buying a home in the USA. Unless you are a foreign citizen and rich and then you can get an interpreter.
I dont know about Illinois, but I do know that in California…….the advertisement or “teaser rate” is supposed to be regulated by the state. A company cant just say what ever they want to, so, California is responsible for failure to oversee. You cant let someone call the kettle black, and then sue them because they did when you are the regulator.