Homeowners Sue Countrywide!

Who isn’t suing Countrywide lately? Phuong Cat Le from the Seattle Post-Intelligencer says that a group of homeowners are now suing Countrywide, alleging that the lender steered them toward high-risk loans without disclosing the inherent risks.

From the P-I:

They allege in the complaint that the lender misrepresented the terms of ARMs (adjustable-rate mortgages), marketed risky complex loans by emphasizing low teaser rates while misrepresenting later steep monthly payments and routinely encouraged borrowers to refinance only months after an affiliated broker sold them a loan.

The plaintiffs in this case include June Taylor, a Renton resident, who refinanced a home loan with Countrywide in 2006. She didn’t receive a good faith estimate or a truth-in-lending statement before she closed on the loan — both required by law, according to the complaint. In addition, her truth-in-lending statement listed her monthly payments, but failed to note that it represented only the minimum payment that Countrywide was willing to accept rather than the actual amount she owed. Thus, she ended up with a loan that actually grew over time, the suit alleges.

Oh June, who doesn’t want a mortgage that grows over time? You’re just not looking at the bright side of things. Like… um… never mind. Nobody wants a growing mortgage. Good luck with your lawsuit.

Homeowners sue Countrywide [P-I]
(Photo: So Cal Metro )

Comments

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  1. Bladefist says:

    oh that’ll help our housing crisis. Sue Countrywide, so the tax payers can bail them out. Awesome.

  2. ShortBus says:

    Legislating honesty? Good luck with that.

  3. Sudonum says:

    @Bladefist:
    Do you think the Feds will have to bail out BofA?

  4. Quilt says:

    This mortgage crisis is so scandolous!

  5. Bladefist says:

    @Sudonum: I don’t know BoA financial status. But, any lawsuits that come from business prior to the merger, may have contractual deals that make BofA not responsible.

    It depends how big these law suits get.

  6. Shadowfire says:

    @Sudonum: Did we originally think the feds would have to bail out Freddie Mac? Sallie Mae?

  7. plural_of_moose says:

    @Bladefist: Well, to be fair, Bank of America bought them, if I remember correctly, so I couldn’t think of a nicer company to get sued. Wonder who assumed the legal liabilities in that purchase…that’s the question.
    I totally agree with you in that I don’t want my money to be paying for a bank’s mistakes, but suing the bank is the only real way to punish bad behavior, since the government has already shown that it will step in and bail out. If BoA made Countrywide into a division of BoA, it might hit BoA, which will hurt shareholders of the bank, but give incentives to be more thorough/write tighter contracts/do more liability research/buy liability insurance.

  8. Audiyoda says:

    @ShortBus: This has nothing to do with honesty – this has to do with idiots who took out mortgages without knowing what they were getting into. Having now had two mortgages in my life I can tell you without a doubt the terms of said mortgage are more than spelled out on more than one document. Those are documents I signed – acknowledging that I understood them and would bare responsibility for understanding them.

    Yes, lenders got in over their heads with these sub-prime and no income verification loans. But the people who took out these loans knew exactly what they were getting into and now what to point the finger of blame elsewhere.

    My home was foreclosed upon in June – do I look at my lender (First Horizon) and place blame on them? Hell no. I lost my job and couldn’t get another one – I’m still unemployed (in Michigan with the highest unemployment rate in the nation). Sure it would have been great if First Horizon actually lived up to their promises to be understanding and helpful in my family’s time of need – but the bottom line is that I could not bare the burden of my family’s financial obligations (regardless of circumstances). We’ve certainly learned a lesson (or three) from the entire ordeal.

  9. triplehelix1919 says:

    why are we wishing them success on their lawsuit? They’re the ones who foolishly signed up for mortgages they couldn’t pay. When it comes down to it, its their signature next to the X and they should be held accountable for that.

  10. Sudonum says:

    @Shadowfire:
    Well they haven’t done so yet, but quite frankly people have been warning about the reckless practices at Freddie and Fannie for at least 10 years. And the fact that both organizations are still able to raise capital, despite the battering they’re taking on Wall Street, tells me that a bailout, while possible, is not likely.
    @Bladefist:
    I’ve been involved in some situations where one large company buys an asset (or assets) of another large company. In most cases where the asset is being acquired “lock, stock, and barrel”, the acquiring company is on the hook for the liabilities as well as the assets. Due Diligence on the part of the acquiring company is one of the biggest aspects of the sale. I find it extremely hard to believe that BofA was able to complete the purchase without assuming the liabilities and without doing due diligence as to the extent of those liabilities. And in many instances, when a company is just buying the assets, they will not continue to use the name of the acquired company. And there are no successors to Countywide to assume the liabilities.

    But as you pointed out, we are not privy to the details of the sale.

  11. KeilwerthLA says:

    If you don’t know what the hell an ARM is, why the hell are you getting one? I’m only 27 but I’m not a f#uck!ng idiot. It’s morons like these who will want taxpayers like me who didn’t get a loan they can’t afford to pay for their defaults.

    In the words of a Lit song: “Been around the world and found that only stupid people are breeding…”

  12. _NARC_ says:

    @triplehelix1919: I would normally be with you on this one, but if they truly did not get their Truth in Lending (TIL) or HUD1, and the payment was mis-represented on it, they’ve got a case for lending fraud.

    Now, I would wager that they likely did, as every loan officer knows full well that they better make sure that the borrower has one. But there is the chance that they didn’t, and thus have a case.

    All that said, they should have read the mortgage note before signing it and realized that something didn’t match up. But I have to tell you, some of these ARMs with deferred payments or negative amortizations might be confusing to a borrower. No excuse, but once they saw their low payment and rate, they probably stopped looking.

  13. snoop-blog says:

    Hmmm, can’t blame America’s stupid people on anyone but America though. If the literacy rate is terrible, who do you blame? The people? or the education system? It would seem to me if we invested into our education system more, maybe we wouldn’t have a nation full of people signing for things they don’t understand. I’m a full time college student, and I can tell you, they don’t teach about mortgages in high school…

    I wonder what kind of shape we’d be in if instead of being a country that reward those who take advantage of stupid people, we educated the people to make smarter decisions…

  14. Consumerist-Moderator-Roz says:

    @triplehelix1919: Please remember the comment code: posts just blaming the victim are unhelpful and, frankly, tiresome. Individual personal responsibility is fine, but this is a consumer-oriented website, and as such puts the spotlight on dishonest companies – who are culpable for fraud. Insulting the intelligence of consumers involved is not allowed.

  15. citybuddha says:

    I will look at this one with growing interest

  16. triplehelix1919 says:

    @Consumerist-Moderator-Roz: who exactly is the victim here? I’m not blaming the victim. I’m saying that people should be accountable.

  17. triplehelix1919 says:

    @Consumerist-Moderator-Roz: why are you picking on me? Keilwerth’s comment was a lot more crude than mine and said pretty much the same thing.

  18. lightaugust says:

    @triplehelix1919: Funny, that’s what the lawsuit says.

  19. floraposte says:

    @Audiyoda: That’s like saying that because you’ve been to a place twice without being robbed nobody else was robbed there. You had an individual experience, not a core sample of the entire industry.

    I’ve been through the process twice too, and the bank failed in accuracy and disclosure both times. Mostly because they were sloppy as hell, not, I suspect, from any intent to defraud. Fortunately, I knew what the actual numbers were, so their screwups didn’t hurt me (and they were pretty minor the second time, admittedly; not so much the first time, though). If I had expected them to do their job and had been working on a close budget, though, I would have lost a house the first time. And it’s not an unreasonable expectation that they would do their job, and it’s not the customer’s fault when they don’t.

  20. badgeman46 says:

    I’m not blaming the victim in any way, but the numbers are right there when you close on the house.

  21. dragonfire81 says:

    I think a lawsuit was justified. You can argue “well, if they were dumb enough to fall for it…” BUT when you do business with a company, it’s expected that company should act somewhat ethically.

  22. Melsky says:

    The numbers should be right there and what this lawsuit is saying is that they were not there

  23. dragonfire81 says:

    I mean if I start doing business with any company, I don’t expect to be screwed right from the start (well unless it’s Comcast :P)

  24. bohemian says:

    The person mentioned in the article claimed they were given a fraudulent good faith & truth in lending documents. If she can prove this was the case, she probably has every right to sue the pants off of Countrywide.

    It is one thing for someone to get a funky ARM fully knowing what it is because they want to flip a house and someone being lied to on the legally mandated forms.

    I also agree with Snoop Blog’s comment that we have to do more to educate everyone in financial literacy so these kinds of things happen far less. I learned more about finances from my dad than I ever did in school, but I was probably lucky and an odd example. He sat on the BOD for a bank. Most of my peers are relatively clueless about finances. We not only need more financial education in high school but we need more for adults and especially immigrants. Nothing like being a fish out of water and getting taken financially because your unfamiliar with our systems.

  25. mozillauser says:

    @KeilwerthLA:
    Completely off topic, but that song was actually “Flagpole Sitta” by Harvey Danger (Originally confused on other forums as Green Day, then confused for Lit).

  26. bravo369 says:

    i just cannot believe that people are willing to sign up to a mortgage knowing that the overall cost is going to be over $400,000 (NJ house prices) and not do their research into what they are actually signing. where do they think that money is going to come from? do your research, know the timetable, know your arm or get a fixed rate. i bet a good majority of the people who are now having problems paying probably should not have even considered buying a house in the first place.

  27. dakotad555 says:

    @badgeman46: Not, apparently, in at least one of cases in the lawsuit. If you read the article, it clearly says they were not given a GFE and a TIL. I am a mortgage professional (sounds so much better than broker) and I can tell you that without those documents, the mortgage note itself is very hard to use to see what your interest rate is, your APR, and the term of your loan (ARM vs. Fixed, balloon, etc). Honestly, this is not an uncommon problem. I’ve heard of title companies actually helping Loan Officers rip of clients by removing GFEs and TILs from closing packages.

    There is so much fraud on the lender and broker side of the business it is not even funny. I’m not above saying that many people who ended up with bad loans could have and should have avoided them, but a whole lot more were ripped off my dishonest brokers, lenders, and title companies (or the perfect storm of all three).

    Another part of the complaint in the lawsuit is that Countrywide was soliciting refinances from those who just got one from one of their affiliated brokers. This is called ‘churning,’ and if they are able to make it stick, it will likely get Class status and Countrywide will be facing huge, huge damages. The ethics of buying a loan, only to have your own in-house sales force trying to turn it around again in a few months time are despicable. I for one hope Countrywide gets annihilated, and that Leather Face goes to prison for the rest of his (un)natural life.

  28. badgeman46 says:

    @dakotad555: Honestly, and no offense meant by this, mortgage brokers should be regulated or outlawed. They push all this stuff for maximum comission and they have no vested interest if the note goes south. They are just a third party.

  29. dakotad555 says:

    @badgeman46: I would agree with you 95% of the time. But tell my client who I just helped get out of a failing arm after her bank told her there was nothing they could do that we’re all worthless. I worked with her for 4 months (while her mortgage payments kept increasing) to get her fico score high enough to qualify her for a solid, 30yr fixed loan. I might be in the minority, but we are not all bad. As an aside, I am only part time. My full time job is as a Finance Manager for a not-for-profit. I work as a LO on the side, and my only marketing is word of mouth.

  30. _NARC_ says:

    @bravo369: I’m not sure if you are taking interest payments into your cost here, but if so I think it’s a little low.

    For instance, a $300,000 fixed 30 year loan @ 6.5% will accrue $382,633 in interest over its lifetime. So really, the cost is much more than just the principal of the mortgage.

    Now, say that you neg-am that loan and have a payment of only $1,200/month for the first 3 years instead of the full $1,896. Your balance is increased by over $16K, and your cumulative interest is now $416,174.

    So this is a really simplistic example, and normally neg-am loans have much less favorable rates and terms than a straight 30ry fixed. So I would assume that the note in the OP would be considerably less favorable than this example.

  31. Thanks for bringing back all my bad Compliance-Dept.-in-a-Mortgage-Company nightmares!!!

    Sounds like the case has some merit. You dont mess with RESPA and TILA. Especially if initial docs dont match final ones.

    Borrowers could get sweet new loans out of this, but that might be it…unless CW didn’t have them sign all the ARM, Prepay Penalty and Neg-Am disclosures. If CW ignored all of that…cash money!?

  32. cmdrsass says:

    The mortgage facilitators allegedly victimized these people, and now it’s the ambulance-chasers turn.

  33. Mfalconieri says:

    As soon as my state has a class action suit I am in… I thought they screwed me since day one.

  34. u1itn0w2day says:

    I hope they nail all these banks and brokers because they are at least half the problem.BUT when YOU wind up signing the equivient of a small book in the way of documents and don’t think there might be consequences or responsibilities on your part you are asking for trouble.

    Granted most of this crap you shouldn’t even have been allowed to offer or have people sign.But why the heck did the borrowers think they were signing several dozen times.I’ve heard that if you put your name on something simple like a 1 paragraph office memo you are agreeing to what ever it says.I don’t sign memoes unless it directly involves a paycheck.I print.Signature = contract.Contracts = lawyers and fine print.

    If there is dollar figures on a document and they want a signature read it,think about it,put disagree or something but do NOT ASSume it’s harmless.

  35. hahamaximus says:

    As someone who is left trying to sell a house due to relocation and having the tri-fecta of short-sell, foreclosure and legitimate for-sale listings (i.e. mine) in my market, I suggest starting with CountryWide and work your way down to the borrowers who took on more than they can afford.

    Granted you can’t take more from those who now have nothing, but they signed the loan and as such should be held accountable as well as the lenders. And no, CountryWide likely didn’t initially write all these loans, they bought them based on lies from the first loan companies.

  36. ra8s says:

    The old adage still stands “buyer beware”. Whatever happened to the days when people actually paid attention to what they were signing. I agree 100% that in this case the consumers should be held responsible. I bought a house back in 2003 just when house prices were taking off in Las Vegas. I bought a house for less than I had been approved for and would only consider a fixed rate mortgage because even then I could tell that ARMs were a very bad idea.

  37. Ajh says:

    For future victims: Remember to research companies on the internet before signing something big like a home mortgage. If they’re doing stuff like this it’ll be talked about online.

    It’s sad that they won’t see this message but still.

  38. Consumerist-Moderator-Roz says:

    @triplehelix1919: That’s fine, but this is a consumer watchdog site, not a corporate watchdog site that keeps an eye on problem consumers. Coming in to threads about corporations lying and saying “it’s the victim’s fault because xxxxx….” has gotten very tiresome and hence it’s against the rules.

    The poster you mention no longer has posting privileges here.

  39. snowburnt says:

    @triplehelix1919: cute troll. you might not have been in this situation, but a lot of people in this mess were either approached by a lender or were curious because of greed probably about if they could own a home. Countrywide and other lenders blatantly lied to them about what they could or couldn’t afford and fit them into a mortgage that they could barely afford and would then amortize and become completely unaffordable. The scenario worked for a while while housing prices were sky rocketing because they could refinance in a year or two and get a traditional loan, if the people even realized that they had a 24 ton weight over their heads.

    The fact of the matter is that mortgage lending professionals had been lying to people in order to get commissions and finders fees. the “professionals” we were meant to trust had been telling us that we could afford it…afford it easily…wouldn’t be a problem.

    Before the tobacco lawsuits if your doctor told you that smoking cigarettes would cure your allergies would that be your fault? would you want your doctor held accountable if you die of lung cancer?

  40. I looked into mortgages at the height of all this garbage, and I was not once asked/told/coerced into lying about my income, buying more than I could afford, or doing anything I didn’t want to do. I realize that this probably isn’t the case for everyone, but come on, you’re signing away 30 years of money to someone, shouldn’t you know what you’re signing? If the woman in the article can prove that she didn’t get the right documents then that’s one thing, but a little bit of consumer homework here could have gone a long way.

    I for one hope they start teaching financial planning and responsibility classes in schools, it’s apparent that we as a country need a re-education.

  41. RStewie says:

    I closed on my very first house at the beginning of summer, and this whole mortgage-crisis is not the only thing that made me do extra homework when it came to my mortgage lender. I lucked out adn was still eligible for a loan from USAA (thanks to prior military service), and then purchased the house from the owners directly.

    When I signed any document, I called either the bank or the closing attorney beforehand to find out the what, where, when, how of what I was agreeing to. Part of my experience being successful was the fact that I could count on these people to tell me what was going on, honestly. Part was because I DID ask those questions, and if the answer didn’t make sense, I asked it again and again.

    The best thing anyone can take from this is to remain vigilent. These companies owe you honesty, but they don’t owe you a fantastic deal and wonderful experience.

  42. lockers says:

    @Consumerist-Moderator-Roz: The consumerist regularly runs stories about bad consumers. Your assertion simply isn’t true that this site doesn’t deal with both sides of the story. I always assumed this was a place to become a more informed consumer. Isn’t getting us better informed about the most important financial decision relevant to us? Isn’t the risk involved in ARMs important to communicate? It’s pretty offensive that you consider anything other than bashing the evil bankers verboten. How is that helping me avoid the fate of so many in this situation?

  43. TeeDub says:

    @lockers: While I understand you want to believe the big corporations do no wrong, you have to understand that preying on the uninformed consumer is actually the problem here. There are strict rules that a corporation must follow and apparently, if we are to believe the consumer/poster (and we must on this site per the new posting rules) then only the corporation is to blame in this case.

    It is clearly not the uninformed consumer’s fault that they agreed to terms that were printed on the documents they signed. Do you ever read an EULA before you click accept? No you hope that the person explaining it to you has your best intentions at heart.

  44. bestpracticeall says:

    The money mortgage brokers aren’t required to disclose how much money they stand to make, and should be…they routinely sell loans that make THEM the most money since they don’t represent the buyer. Real estate agents have to disclosure who they represent..I think mortgage brokers should and the buyer should know how much they stand to make on the loan.

  45. bestpracticeall says:

    I would feel angry about being victimized, but unless you’re under age, mentally incompetent or forced against your will and you sign a contract why shouldn’t you be held to it? Most people don’t want to spend the money to hire an attorney for $300-500 to review a purchase of 100 times that much.

  46. moracity says:

    So, they are suing because they were either too lazy or too stupid to realize what they were doing.

    In criminal cases, I am pretty sure ignorance of the law is not a defense. It shouldn’t be a defense here. No one forced them into a loan.

    The people made bad financial descriptions and want the rest of us to pay for it. I bought a house in the middle of all these crazy loans. I got a regular 30 year, 5% mortgage on a house half of what the lender pre-approved us for. I don’t even have a college degree and I knew that the pre-approval amount was more than we could afford and that all these ARMs were bad news.

    Now I’m supposed to bail them out because they had no self control and wanted to get the biggest, most expensive house possible they could find to park their 72-month leased BMW and SUV?

    F- Them. They deserve what they got. I have my own family to take care. I can’t afford to take care of theirs.