The one-time king of the hill of mortgage lending is now being continuously hounded by lawsuits from just about all corners of the spectrum. Company shareholders, employees and borrowers have already filed a pile of legal action against it and to make matters worse several states just now decided to join the increasingly far-reaching tussle.
California, Illinois and Washington each filed their own particular lawsuits, claiming for instance that Countrywide employed "misleading marketing practices", maneuvered borrowers into "risky and costly mortgage loans" without having the ability to pay them back and that it used "unfair and deceptive practices" in marketing loan products. That is pretty heavy material and if it's true, then the lender should be held liable.
If at least some of this can be proved in the courts, Countrywide could be directed to pay restitution to its borrowers. That's exactly what the states are seeking with their legal action. The restitution could be the return of all the profits the lender made off a chunk of loans and perhaps even go as far as having to hand back foreclosed homes. Wouldn't that be something? In the year 2008 Joe Homeowner was foreclosed out of his house and in 2010 Joe gets a letter in the mail saying that he just got his old house back. That surely would make Joe scratch his head. Anyway, affected people in California, Illinois and Washington should be following closely how these lawsuits play out in the coming months, although it more likely will take years before they all are sorted out.
Another thing is that Bank of America is about to close on the purchase of Countrywide, an action that now looks a little questionable. When it first made the offer, B of A probably wasn't aware of all the potential problems that would come with the deal. Now it's too late to back out, so it just has to put aside a truckload of money to cover possible restitution and other costs associated with these lawsuits. Some experts have figured that Countrywide-related write-downs could go as high as $9 billion. A tidy sum.