Illinois AG Sues Countrywide, Alleges Lending Discrimination

Posted on July 1, 2010 by Fred Rivera

The Associated Press reports that Illinois Attorney General Lisa Madigan has sued Countrywide Home Loans, alleging the company discriminated against African American and Latino borrowers in Illinois between 2005 and 2007.  The complaint includes allegations that Countrywide charged African American and Latino borrowers higher rates and fees compared to similarly situated white borrowers.   The complaint states that Countrywide engaged "in practices that resulted in a disparate impact and disparate treatment of African American and Latino borrowers.  The complaint also alleges that Countrywide utilized lending standards that had no economic basis and were discriminatory in effect..."

While the complaint includes allegations not unfamiliar in lending discrimination cases, it may spark important legal analysis regarding the use of the disparate impact theory as the sole basis to provide lending discrimination.  See prior posting  - "AAG Perez Reiterates DOJ's Emphasis on Lending Discrimination Enforcement," June 24, 2010.

 

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Countrywide Pays $108 MM to Settle FTC's Foreclosure Fee Case

Posted on June 7, 2010 by Fred Rivera

According to a June 7, 2010 New York Times article, the FTC announced that two Countrywide mortgage-servicing companies agreed to pay $108 million to resolve charges that they collected excessive fees from homeowners.  The FTC alleged that Countrywide charged excessive fees to homeowners who were behind on their mortgage payments, in some cases asserting that borrowers were in default when they were not.

In addition, the FTC said in its statement announcing the settlement that Countrywide at times imposed a new round of fees on homeowners who had recently emerged from bankruptcy protection, sometimes threatening the consumers with a new foreclosure.   The case was brought with the assistance of the U.S. Trustee.

The FTC charge alleges that when homeowners fell behind on mortgage payments and were in default on their loans, Countrywide ordered property inspections, lawn mowing, and other services meant to protect the lender’s interest in the property.  However, according to the FTC complaint, rather than hire third-party vendors to perform the services, Countrywide created subsidiaries to hire the vendors that marked up the price of the services charged by the vendors.  The mark-ups were then passed on to the borrower. The complaint alleges that the company’s strategy was to increase profits from default-related service fees in bad economic times.

The settlement requires Countrywide to pay $108 million for refunds to homeowners that the FTC alleges Countrywide overcharged before July 2008.

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SEC Recommends Civil Fraud Charges Against Countrywide's Mozillo

Posted on May 14, 2009 by Fred Rivera

The Los Angeles Times reported on May 14, 2009 that SEC investigators had recommended the filing of civil fraud charges against former Countrywide chief executive Angelo Mozillo.  According to the article written by E. Scott Reckard and William Heisel, persons familiar with the matter report that SEC staff are seeking approval to file fraud charges that include insider trading and failing to disclose to shareholders the company's risks associated with its sub-prime mortgage business.  The article states that Mozillo's attorneys were provided with a "Wells" letter weeks ago, and the matter is now before the SEC's five commissioners to approve or reject the investigator's recommendation. 
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