Former mortgage lender Countrywide Financial is mailing out checks to 2,700 borrowers as part of a settlement with Florida homeowners, according to a press release from Attorney General Bill McCollum.
In July 2008, McCollum’s office filed a lawsuit against the Calabasas, CA-based home loan lender for what it called deceptive and unfair trade practices, namely putting borrowers into mortgages they couldn’t afford with misleading mortgage rates and prepayment penalties.
More than $16.9 million in so-called relief payments will be distributed this week, with each check written for over $6,000.
The big question is how many of the affected homeowners actually still own their homes (or are at least current on the mortgage payments), given the fact they’re located in foreclosure-riddled Florida.
The AG was also awarded $4 million to fund a foreclosure defense assistance program; the first funds were distributed in late 2009.
The organizations that receive the grants over the next two years have agreed to provide free legal assistance to eligible homeowners facing foreclosure who cannot afford an attorney to review their case.
Ex-Countrywide boss Angelo Mozilo was also named in the case, and a civil case against him is still pending in Broward County Circuit Court.
Joins Growing List of States Coming After Countrywide
Like I mentioned earlier (jokingly), this won’t be over until all 50 states and Puerto Rico have filed a lawsuit against former mortgage lender Countrywide Financial.
In August 2008, Indiana Attorney General Steve Carter filed a lawsuit against the Countrywide, accusing the company of unfair practices that landed borrowers in high-risk mortgages.
That investigation found that the most common misrepresentations pertained to prepayment penalties, the time period in which adjustable-rate mortgages would reset, and income documentation.
Carter has requested that Countrywide end the deceptive practices, void prepayment penalties on Countrywide originated loans, and void any portion of a Countrywide loan that resulted from the alleged deception.
The state is also seeking $15,500 per violation and consumer restitution, which is yet to be determined.
Indiana is the sixth state to take action against Countrywide, following similar action by California, Connecticut, Florida, Illinois, and West Virginia.
Funnily enough, the Indiana AG forgot to mention West Virginia…that hurts Indiana.
Speaking of West Virginia, Attorney General Darrell McGraw filed that suit against Countrywide Financial Corp., Countrywide Home Loans, Countrywide Home Loans Servicing, Full Spectrum Lending, and former CEO Angelo Mozilo personally.
The suit argued that the mortgage lender and its subsidiaries made loans to West Virginians that were “unaffordable and unconscionable,” adding that the companies used “unfair and deceptive” practices to make and service the loans.
It alleges that Countrywide induced consumers to take out exploding adjustable-rate mortgages and noted in one case that a consumer wasn’t able to refinance because the original home appraisal was so highly inflated.
Connecticut Attorney General Richard Blumenthal also sued Countrywide and related companies for alleged deceptive lending.
The suit claimed that Countrywide pushed consumers into unaffordable loan workouts, and charged homeowners in default unjustified and hefty legal fees.
Blumenthal noted that the mortgage lender violated state consumer protection and banking laws by encouraging borrowers to take out unaffordable loans, inflating borrower income, playing down negative aspects of the types of loans they sold, and promising borrowers they could refinance their mortgages once the adjustable term expired.
In one case, a borrower’s home equity loan application was allegedly rejected at one Countrywide branch, but subsequently approved at another.
The lawsuit seeked civil penalties of up to $100,000 per violation of state banking laws and $5,000 per consumer violation, the surrender of ill-gotten gains and an order to cease its illegal practices.
Don’t Forget Oregon, Countrywide
The former home lending giant was also sued by the state of Oregon over pension fund losses tied to risky mortgage-backed securities.
Oregon Treasurer Ted Wheeler and Attorney General John Kroger said The Oregon Public Employee Retirement Fund was “induced to invest” $200 million in home loans originated by Countrywide, and lost $29 million as a result of misrepresentations by the lender and its financial underwriters.
The suit, filed in federal court in California, says Countrywide provided documents to investors that “falsely claimed” all mortgages held in the investment fund met acceptable underwriting standards, such as credit score requirements and a borrower’s ability to repay.
It claims Countrywide was able to originate loans on such a massive scale because they could easily be packaged and sold on the secondary market, providing funding for new batches of toxic loans.
Per the suit, Countrywide was the largest mortgage lender from 2005 through 2007, originating more than $850 billion in home loans between 2005 and 2006 alone.
Oh, and originate-to-distribute loans apparently default more than loans held on banks’ books.
Oregon is the eighth state (?) to take action against Countrywide, following similar action by California, Colorado, Connecticut, Florida, Illinois, Indiana, and West Virginia.
Countrywide was acquired by Bank of America back in 2008 after taking on massive losses tied to the ongoing mortgage crisis.
The obvious question now is, which state is next?