Predatory Lending - Wednesday, July 1, 2009 8:24 - 0 Comments

Court rules against Countrywide in mortgage lawsuit

A federal judge in San Diego has rejected Countrywide Financial Corp’s attempt to dismiss a lawsuit accusing it of steering borrowers into risky mortgages to maximize profit. The class-action complaint accuses Countrywide of inappropriately convincing borrowers to take on subprime mortgages they could not afford, violating federal racketeering and conspiracy laws, as well as state laws barring unfair competition and unjust enrichment. As we have previously reported, Countrywide was the nation’s largest mortgage lender before being acquired last July by Bank of America Corp.

U.S. District Judge Dana Sabraw rejected Countrywide’s argument that the Plaintiffs did not show sufficient evidence of a “racketeering enterprise” among independent mortgage brokers to warrant dismissal of that part of the case. Judge Sabraw also denied Countrywide’s motion to strike the state claims. But the judge did dismiss claims by one Plaintiff because he lacked standing to pursue his case.

Bank of America has faced a good number of lawsuits and regulatory investigations relating to Countrywide. As we all know, the name Countrywide became synonymous with the risky lending practices that helped fuel the U.S. housing boom and subsequent bust, affecting millions of Americans. Interestingly, Bank of America has dropped the Countrywide name from its mortgage operations, renaming the business Bank of America Home Loans. While that’s a smart move, it doesn’t take away Bank of America’s exposure since it assumed all liabilities of Countrywide. The case is pending in the Southern District of California.

Source: Reuters