STEP FORWARD - Shriver Center

By Kelly E. Slay, Asset Building Specialist

While Bank of America was making plans to finalize its pending acquisition of Countrywide Financial Corp., Illinois Attorney General Lisa Madigan was making a plan of her own. On Wednesday, Madigan filed a civil lawsuit alleging Countrywide’s violation of the state’s consumer protection statutes-relaxing underwriting standards, structuring loans with risky and defective features, and intentionally misleading consumers are just a few of the claims against Countrywide and its chief executive, Angelo R. Mozilo.  The Shriver Center has been actively voicing concerns over Bank of America’s acquisition of Countrywide, including writing letters to legislators and discussing with federal regulators during the 2008 National Community Reinvestment Coalition Conference in Washington, D.C. California followed the lead of several advocates and the State of Illinois by filing a similar lawsuit of its own.

According to the Chicago Tribune, Madigan’s office filed a civil suit because it requires a lower standard of proof and often results in some kind of negotiated financial settlement instead of going to trial. Madigan also maintains that her goal is to help consumers stay in their homes. She hopes that the 90-day stay on Countrywide foreclosures and restitution to those whose homes were lost to foreclosure will do just that.

Buyer’s Remorse for Bank of America?

The lawsuits filed by Illinois and California against the nation’s largest originator of subprime mortgages will only add a dark cloud over the company’s acquisition by Bank of America, which is expected to close on July 1. According to the New York Times, Bank of America will face considerable legal risks since the U.S. Trustee, a unit of the Justice Department that monitors the bankruptcy system, has also sued the predatory lender. Countrywide and its executives have also been named as defendants in shareholders lawsuits; Countrywide is the subject of investigations by the Securities and Exchange Commission, the Federal Bureau of Investigation, and the Federal Trade Commission.  

Crisis Hits Home

Even though Countrywide’s fortunes have take a huge hit as the foreclosure crisis continues to peak, homeowners are the ones who continue to get the short end of the stick. Nearly 71 percent of Countrywide’s subprime borrowers are defaulting as adjustable rates reach exorbitant and unmanageable levels. Foreclosure rates in the U.S. rose 75 percent in 2007.

Trying to drive home the impact of the lender’s deceptive practices here in Illinois, Dory Rand, supervising attorney for the Community Investment Unit at the Shriver Center and incoming president of the Woodstock Institute (effective July 16), testified at a hearing held at the Federal Reserve Bank of Chicago on the pending acquisition by Bank of America. “Bank of America should freeze loans at the lower ‘teaser’ rates and conduct and support aggressive outreach to borrowers to preserve families’ biggest assets-their homes,” said Rand.

The Shriver Center is committed to fostering the stability of families and working to move individuals from poverty to prosperity through asset building and protection.

Tags: Asset Building

This entry was posted on Wednesday, July 2nd, 2008 at 9:32 am and is filed under Community Investment. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.