…Adds Themselves to the Growing List of States
At the beginning of the month, Countrywide was acquired by Bank of America, but that has not stopped the troubles Countrywide got themselves into. Led by their Chief Executive, Angelo Mozilo (their "perfectly tanned" leader), Countrywide became the Number 1 lender in the nation, and also the Number 1 in scandals surrounding the subprime mortgage meltdown and ensuing credit crunch. Remember that Angelo Mozilo is under investigation by the SEC as well.
The growing number of states that are suing Countrywide are regarding misleading and unfair trading practices. States are even naming Angelo Mozilo in the lawsuits, potentially leaving him open to personal liability should they prove gross negligence.
The Complaint – Purposefully Lending to Unqualified Borrowers
The 12-page lawsuit claims that Countrywide did no due diligence on applications accepted which were patently fraudulent and reflected the inability of borrowers to make payments. Further claims stated unsophisticated borrowers were targeted by mortgage brokers who knew Countrywide would write these loans.
The complaint was filed in my backyard (so to speak), in Broward County, one of the leading areas relating to mortgage fraud and foreclosures nationwide. The complaint states that Countrywide hid the potential negative effects of its so-called "teaser" loans (aka Option ARMs), including increased interest rates and prepayment penalties.
Should Bank of America Acquire Countrywide?
Florida joins California and Illinois in the growing list of states suing Countrywide, as more are likely to be added. One can only wonder why Bank of America did not back out of the acquisition deal, now that they have assumed all the problems Mozilo and Countrywide created.
One thing that has resulted is the end of negative amortization loans by virtually every lender with the remaining lenders backing out in fear of lawsuits as well. The problem is that the Option ARM was actually one of the most strategic loans for creating wealth for homeowners when used properly. It is unfortunate that so many homeowners, knowingly or not, abused it and managed to have it eliminated.