I’m sure that you remember watching a football game where the ball carrier was tackled, was down on the ground, the play had been whistled dead, and yet four more players jumped on the pile. That sure seems to be happening with Countrywide.
You will recall that another lender, Ameriquest, was accused on similar improprieties, alleging that they had taken advantage of consumers. Before it was all over, the Attorneys General of 49 states and the District of Columbia had joined in the suit! Talk about piling on!
In the end, in one of those "we didn’t do anything wrong but whatever you say we did we promise not to do again" type settlements Ameriquest paid $300 million into a fund to reimburse wronged borrowers and paid another $50 million to the states to reimburse them for legal costs. Another result of the action was that Ameriquest then started the process of closing their operations, shuttering some 229 retail offices. The company basically does not exist today.
We all know that if the Bank of America acquisition goes through, Countrywide will also cease to exist as a brand name. Bank of America is acquiring the company at about $2 per share, down from a top of $45. My calculations of the value of their loan servicing portfolio is many times the acquisition price, but a big question is the extent of the legal liabilities that BofA will also assume.
There are a number of suits that have been filed, including one by employees who lost money tied up in their retirement accounts, money that was invested in Countrywide stock. They sued the company and the executives who, they said, misled them too.
In the latest action, the States of Illinois and California have filed suits that will become suits against BofA. Top Countrywide executives are variously named in the suits also. You can count on this being a long, drawn out legal battle. The allegations in the suit are ones you have heard before, all practices they engaged in to sell unsuitable products to borrowers who didn’t understand what they were getting into.
From all the people I know in the industry who tell me what was going on at Countrywide and similar lenders, it is likely that the allegations are all true. But someone has to prove a lot of things before there is a settlement, and you can rest assured that the cost will be a lot more than $325 million. What ultimately happens is a matter of conjecture, but if you are an aggrieved Countrywide borrower, I would not hold my breath.
Randy Johnson Randy is a Credit.com contributor and seasoned mortgage expert. He writes about home buying, mortgage laws and real estate finance issues. He has financed over $1 billion in properties, is the author of How to Save Thousands of Dollars on your Home Mortgage and he is a feature columnist for Savvy Borrower.
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Are you looking to garner sympathy for Countrywide ??? Granted, they may not be 100% guilty of ALL the things they’re being accused of, but I just can’t work up one iota of sympathy for them given then things they DID do.
Not shedding any tears for them AT ALL!
ABSOLUTELY NOT! I think that those guys deserve everything they are getting. I’m only sorry to see that a brand name that 50,000 employees helped build over almost 40 years was destroyed by greed of the guys at the top. That said, it required a lot of other employees too and maybe a lot of good ones got caught up in the greed thing.
It will be interesting to see if Mr. Mozilo gets to keep all the $475 million from stock sales that he did while the company was melting down before him
As to piling on, my guess is that a bunch of other states will join in the fray as did IL and CA. Maybe it will end up with 49 states and D.C. before it is over.
The saddest thing is that helping people finance their houses is, or at least can be, an honorable profession. Ever since 1992 the ethics of the business have declined and more scumbags entered the business to the point today where it is, I think, hard to find someone to trust.
I am not defending what these greedy executives did or saying that they shouldn’t get everything they deserve. I’m just getting tired all the blame for the current mortgage credit mess being placed only at the feet of the corporate world.
I refinanced my house a couple of years ago. I did a lot of research, compared lenders and rates and settled on Countrywide. I chose a fixed rate, had low refinancing costs, a quick turn around, no surprise expenses and all in all, had a very positive experience. After the refinancing, the customer service reps were friendly and courteous when ever I had an interaction with them.
What I didn’t do was try to buy or refinance a house I couldn’t afford to make the payments on or that was going to put me on track for bankruptcy once the adjustable rate expired or the balloon payment became due. I did read all the fine print myself, and had a lawyer review the paperwork and explain it all to me before the closing.
What I don’t see is the people who took out these loans admitting that they were greedy too or that they are responsible for any part of the mess. Instead, what I hear is that millions of my neighbors were too stupid to read a contract or make reasonable financial decisions for themselves, so lets blame someone else.
When I hear about all these supposed victims, I think, wait, what about me.. because of all this stupidity and greed, my house is now worth less and in large part this (and yes I know many other things) has caused my retirement nestegg to be worth less as well. I and other reasonable, responsible homeowners like me are the real victims.