The case is Alston v. Countrywide Financial Corp., 07CV03508, U.S. District Court, Eastern District of Pennsylvania (Philadelphia).
Bank of America Corp. (BAC)’s Countrywide unit won preliminary court approval of a $34 million settlement of a lawsuit claiming the company overcharged for mortgage insurance.
U.S. District Judge Juan R. Sanchez in Philadelphia granted tentative approval to the agreement today. A final hearing is scheduled for Aug. 23.
Three Pennsylvania homeowners alleged in their 2007 lawsuit that Countrywide, once the biggest home lender, required homebuyers who took out mortgages with a down payment of less than 20 percent to obtain private mortgage insurance from a preselected group of providers.
Those providers agreed, in turn, to reinsure the policies with a Countrywide affiliate, Balboa Reinsurance Co. The homeowners alleged that Balboa collected more than $892 million in reinsurance premiums since 1999 and paid nothing in claims. Countrywide was accused of accepting a portion of the premiums and providing no services in return.
“Countrywide denies any wrongdoing and liability and is settling to avoid the cost and uncertainty of further litigation,” Shirley Norton, a spokeswoman for Charlotte, North Carolina-based Bank of America, said in an e-mailed message.
The settlement, reached in November and revised last month, covers borrowers with residential mortgage loans that were taken out from Dec. 22, 2005, through Dec. 31, 2008, and reinsured by Balboa or its subsidiaries, according to court documents.
The U.S. Court of Appeals revived the suit in October 2009 after ruling that the district court had erred in dismissing the claims.
Interesting that the lawsuit has to do with overcharging homeowners' mortgage insurance and the insurance company is Balboa Insurance, the insurance company in which OperationLeakS exposed this week.