Bond Insurer Sues Countrywide For Lax Standards When Making Bad Loans

In New York City, The Lower Hudson Journal News reports:

• Lax lending standards and fraud by the giant home lender Countrywide Financial Corp. contributed to thousands of home mortgages going into foreclosure during the housing bust, leading to major losses for bond insurer MBIA Inc., according to a lawsuit filed by MBIA.

• MBIA alleges in the suit that its insurance unit incurred $459 million in costs related to the bad loans at Countrywide and that additional claims exceed several hundred million dollars. MBIA seeks damages from Countrywide in the suit filed Tuesday at the New York State Supreme Court in Manhattan.

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• MBIA’s insurance unit provided guarantees on billions of dollars of trust obligations of Countrywide mortgage-backed securities, but would have not done business with Countrywide if it had known about the lax standards, according to the lawsuit.

For more, see MBIA sues Countrywide.

See also, MarketWatch: MBIA unit sues Countrywide units over securitizations.

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More On The $8+ Billion Settlement In Countrywide Loan Litigation; Subprime Borrowers To Get Mandatory Loan Modifications

The New York Times reports:

• [T]he Countrywide effort is the most comprehensive, mandatory loan workout program since the mortgage crisis began last year. Congress has proposed various programs, but those measures did not make it into the final $700 billion government bailout. Since taking control of Fannie and Freddie Mac, the two housing giants, the Federal Housing Finance Agency has said it is looking at expanding modifications on the loans that Fannie and Freddie own or guarantee.

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• Along with the direct relief, Countrywide will waive late fees of $79 million and prepayment penalties of $56 million and suspend foreclosures on delinquent borrowers with the riskiest loans. A foreclosure relief fund will be created with $150 million from Countrywide to help borrowers who are four months or more behind on their payments or whose homes have already been foreclosed on. The company will also provide $70 million to help troubled borrowers relocate to rental housing. In all, Countrywide is setting aside $8.7 billion to help borrowers.

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• [Subprime] Borrowers whose first payment was due between Jan. 1, 2004, and Dec. 31, 2007, can participate. The loan balance must be at least 75 percent of the current value of the home, and the borrower must be able to afford the adjusted monthly payments.

• “We have created the first comprehensive, mandatory loan-modification program with the largest loan servicer in the country, and it is going to help homeowners stay in their homes,” [Illinois Attorney General Lisa] Madigan said. “We will use this model when we work with other servicers as well.” She said that approximately $185 million worth of loans in Illinois would be modified under the settlement.

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• “This agreement demonstrates the effectiveness of states in addressing predatory lending and other consumer protection matters, proving states should not be pre-empted by federal legislation,” said Mr. Brown. The program will be administered by state officials who will examine regular reports from Bank of America. The program will begin Dec. 1 as Bank of America contacts borrowers. In the meantime, Bank of America said Countrywide customers can call 800-669-6607 to discuss their loans.

For more, see Countrywide to Set Aside $8.4 Billion in Loan Aid (free registration may be required).

See also, Legal Newsline: Bank of America begins home retention program.

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$8.68 Billion Settlement In The Works In Countrywide Litigation With 11 State AGs; Loan Mods For Many Countrywide Borrowers On The Way

In Sacramento, California, Legal Newsline reports:

• With news of a billion-dollar settlement between financial giant Bank of America and attorneys general from 11 states, thousands of homeowners facing foreclosures could soon have a rebirth of opportunity to save their homes. News of the settlement leaked out of several state attorneys general offices Sunday night. Those close to the negotiations hailed the progress as a significant step toward stemming the tide of the foreclosure crisis that has caused an earthquake in the county's economic foundations.

• "This is definitely a home run," said San Diego City Attorney Mike Aguirre, one of the many city officials suing Countywide Financial Corp. over its alleged predatory lending practices. California Attorney General Jerry Brown, who led much of the negotiations with Bank of America, parent company of Countrywide, too hailed the victory of homeowners. "Unlike last week's congressional bailout," Brown said, "This loan-modification program provides real relief for borrowers at risk of losing their homes."

• Brown said the $8.68 billion settlement, with $3.5 billion going to his state, is the largest of its kind, far surpassing the $484 million settlement with Household Financial Corp. in 2002.

For more, see Countrywide clients find new life in settlement.

See also California AG press release: Attorney General Brown Announces Landmark $8.68 Billion Settlement with Countrywide:

• In addition to California, attorneys general in 10 states, including Arizona, Connecticut, Florida, Illinois, Iowa, Michigan, North Carolina, Ohio, Texas and Washington, are participating in the settlement. Attorney General Brown’s office, along with the Office of the Illinois Attorney General, led the negotiations for the states.

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• The settlement does not include Angelo Mozilo, the former Chairman and Chief Executive of Countrywide Financial Corporation or David Sambol, formerly the President of Countrywide Home Loans and the President and Chief Operating Officer of Countrywide Financial Corporation. Brown will continue to prosecute his case against Mozilo and Sambol.

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Countrywide Scores Win As Miami Bankruptcy Judge Rules Against U.S. Trustee; Says Only Prosecutors Can Bring Action For Lenders' Alleged Bad Acts

In Miami, Florida, The Wall Street Journal reports:

• Countrywide Home Loans Inc. scored a victory against a U.S. government agency that sued it in three states claiming that it engaged in "bad faith conduct" that has hurt debtors in bankruptcy. In dismissing one of the lawsuits Wednesday, A. Jay Cristol, a bankruptcy judge in Miami, said the government agency, the U.S. Trustee Program, couldn't seek sanctions against the mortgage lender in bankruptcy court.

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• In the case Judge Cristol dismissed Wednesday, the agency said Countrywide wrongly tried to foreclose on a debtor's home. The suit called for monetary sanctions, but Judge Cristol found that only federal prosecutors, not the U.S. Trustee, can bring legal action to punish bankruptcy-law violators.

For more, see Countrywide Scores Legal Win (subscription may be required; if no subscription, go here, then click link for story).

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