California AG settles with Countrywide executives

Written by Biloxi
California Attorney General Kamala D. Harris reached a $6.5-million settlement with two former Countrywide Financial Corp. executives, ex-CEO Angelo Mozillo and ex-President David Sambol, in which the state had accused them of predatory lending. Bank of America brought bankrupted Countrywide in 2008. The state will create a statewide California Foreclosure Crisis Relief Fund for troubled borrowers with part of the money. Then Attorney General Jerry Brown filed a lawsuit against Countrywide Financial Corp. According to the lawsuit, Countrywide "lured borrowers with low 'teaser' rates often as low as 1 percent adjustable rate loans. Its loan officers obscured the downsides of these loans, which included rapidly rising rates after teaser rates expired, big prepayment penalties, and negative amortization in which a borrower's total loan costs rose even as additional payments were made. Countrywide also loosened its mortgage standards and verification procedures in order to write more loans."

In addition, the lawsuit alleged both Mozillo and Sambol knew of these illegal practices and allowed the practices to continue. According to Attorney General website, "during the 18 months ending last September, 282,000 California homes went into foreclosure, and in the last three months of 2010, notices of default were filed on another 70,000 homes in the state." Attorney General Harris released a statement on the settlement:

"Our prior settlement with Countrywide provided restitution for foreclosed homeowners and set in motion loan modification programs that have helped tens of thousands of consumers,. We will use the current settlement to help Californians affected by the mortgage crisis by providing grants to agencies that help homeowners facing foreclosure with relocation assistance and providing money to state and local agencies to prosecute mortgage fraud."

Also, part of the settlement is to pay for use of Office of the Attorney General for the investigation and prosecution:

4.
Pursuant to the terms of paragraph 3 above, Defendants shall cause to be paid to the Office of the Attorney General the sum of one million, three hundred and fifty thousand dollars ($1,350,000) as costs of the investigation, attorneys’ fees, and other expenses related to the investigation and resolution of this case. This payment shall be designated for the exclusive use of the Office of the Attorney General for the investigation and prosecution of consumer protection matters, and for consumer education and outreach.
5. Pursuant to the terms of paragraph 3 above, Defendants shall additionally cause to be
paid to the Office of the Attorney General the sum of five million, two hundred thousand dollars ($5,200,000) for the creation in the Office of the Attorney General of a Foreclosure Crisis Recovery Fund (the “Fund”).

Both Mozillo and Sambol waived their rights of appeal and having approved of the Judgment.