A number of states sued Countrywide Bank for their role in the subprime mortgage disaster.
One of the largest home lenders in the United States, Countrywide Bank, was ensnared in a number of lawsuits in 2006 for deceptive lending practices by its subprime mortgage division. A number of states sued the lender and eventually reached a class-action settlement with Bank of America, which purchased Countrywide Bank in 2008. The settlement was worth $8.7 billion. The company is still embroiled in a number of cases over discriminatory lending.
Multi-State Class Action Lawsuit
On Oct. 6, 2008, eleven states reached a settlement agreement with Countrywide Bank in a class-action lawsuit settlement worth $8.7 billion. The lawsuit alleged that Countrywide misled borrowers about the terms, lengths and actual costs of their subprime mortgages and the settlement was designed to help a number of at-risk borrowers avoid losing their homes to foreclosure. The suit covers subprime loans where the first payment was due between Jan. 1, 2004 and Dec. 31, 2007. Under the agreement, Countrywide Bank's new owner, Bank of America, agreed to stop issuing loans that could negatively amortize.
MBIA Insurance Lawsuit
MBIA claimed that misrepresentations by Countrywide Bank caused MBIA to lose over $1 billion in claims against insured debt securities of Countrywide subprime mortgages that ultimately proved to be worthless. The lawsuit alleges that Countrywide's executives abandoned their loan application standards for subprime mortgages, resulting in many loans being given out based on false information about the borrower's income, ultimately leading to a collapse in value of their securitized debt.
Illinois Attorney General
Illinois State Attorney General Lisa Madigan filed suit against Countrywide in June 2010, accusing the company of discriminating against African-American and Latino borrowers. The lawsuit alleges that Countrywide steered minorities into risky subprime mortgage contracts more often than they did with white borrowers and argued that blacks and Latinos often paid more for home mortgages. The lawsuit seeks full restitution of damages to minority borrowers, $25,000 in fines per fraudulent loan and additional unspecified damages.
