Indiana Piles On


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Indiana Attorney General Steve Carter has brought a lawsuit against Countrywide Financial Corp., making it the latest of a half dozen states going after the nation’s former number one mortgage lender for improper lending practices (see Reuters article here). This suit focuses on Countrywide misleading borrowers about the rates and fees associated with their loans and encouraging its brokers to steer borrowers into riskier and ultimately more costly mortgages.

One begins to wonder when the mounting pressure on Countrywide from this flood of litigation will begin to spur Bank of America to take action. BofA has said publicly that it will not guarantee Countrywide’s debts (e.g. here and here). But news last month that BofA transferred Countrywide’s liabilities into a subsidiary, Red Oak, which was then renamed to Countrywide Financial Corp., fueled speculation that those liabilities would indeed be assumed. Analysts from independent researcher CreditSights, Inc., after reviewing a BofA regulatory filing that showed how it was handling Countrywide’s debts, stated that, “[o]ur view continues to be that B of A will ultimately honor the outstanding indebtedness from (old) Countrywide, based on our discussion with the company following this filing, as well as our prior analysis.” (see story here)

Regardless, there’s no denying that BofA’s acquisition increases its overall credit and litigation risk, and that what was hailed as a steal of a deal is beginning to look like a sucker’s bet.

This entry was posted in acquisitions, Attorneys General, banks, BofA, Complaints, Countrywide, lenders, liabilities, litigation, predatory lending, subprime. Bookmark the permalink.