Bank of America took a little kick in the shins today as Countrywide Financial Corp, the mortgage lender they acquired in 2008 as it suck into the quicksand, has agreed to a $624 million settlement of a class-action lawsuit accusing it of misleading investors about its lending practices.
According to terms of the settlement, Countrywide is responsible for ponying up $600 million while accounting firm KPMG LLP is on the hook for the remaining $24 million. The settlement will be paid out to investors who bought the lender’s securities between March 12, 2004 and March 7, 2008.
During the height of the housing boom in the previous decade, Countrywide was the largest mortgage lender in the country, at one point making around 1/6 of the home loans in the U.S.
The lawsuit, which was led by a group of pension funds, including the $129.4 billion New York State Common Retirement Fund, alleged that Countrywide and its officials misled investors about the company’s reliance on subprime and “option” adjustable-rate mortgages.
Plaintiffs claimed Countrywide led them to believe the lender would be able to survive the housing downturn, despite being the ones who arranged the mortgages of so many of the houses being foreclosed on.
“This is a very good settlement that helps repair the damage Countrywide has done,” New York State Comptroller Thomas DiNapoli, who oversees the Common Retirement Fund, said in a statement.
This isn’t the end of legal woes for Countrywide. Former Countrywide CEO and co-founder Angelo “Orangest Man on Earth” Mozilo and two other former Countrywide executives remain defendants in a U.S. Securities and Exchange Commission civil fraud lawsuit that alleges Mozilo misled investors about Countrywide loans and violated insider trading rules in generating a $139 million profit by exercising stock options in 2006 and 2007.