Countrywide suit: Lending "without regard to underwriting standards"

News worth noting: "Directors and officers of Countrywide Financial, the beleaguered mortgage lender, must answer shareholder accusations of insider trading and an overall failure to monitor lending practices that led to the company’s collapse, a federal judge in California has ruled."

More, from The New York Times: "Rejecting the arguments of Countrywide executives and directors that they were unaware of lax loan operations that led to ballooning defaults, Judge Mariana R. Pfaelzer of Federal District Court in Los Angeles ruled Tuesday that she found confidential witness accounts in the shareholder complaint to be credible and that they suggested “a widespread company culture that encouraged employees to push mortgages through without regard to underwriting standards.”

The law firm suing Countrywide has posted the ruling on its Web site, you can read it here.

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: AP

Comments

[Cal]

If you look at the default rates for various originators CFC is pretty much smack dab in the middle, definitely not the best and definitely not the worst. Their subprime stuff isn't what is killing them, it is "Alt-A". Which means good FICO, bad loan. Subprime means bad FICO, bad loan.

I think the old banking joke is the definition of a good banker is one that goes broke at the same time the rest of their peers do. In that regard CFC got it just right.

[mark g]

not even the orange glow of Mozillo can guide him safely through this pending storm...

[Rob]

Oh boy, cant wait, lawers get millions and everyone else get a $25.00 coupon off a refi....

[William Jones]

Lax underwriting at Countrywide? I'm shocked! What next...is there no Easter Bunny? Is is true that every once in a while politicians say something that is less than the whole truth?

Otto von Bismark said that no one who valued laws or sausages should witness the process by which either are made. I guess sub-prime mortgages should be added to that list.

[Robert in Palm Springs]

We can only hope that at last some justice will be done. It is absurd to think Godzilla & friends did not know what was going on. Anyone who has worked for a large corporation knows that standards are set at the top, not the bottom.

If we want the public to have any confidence and trust in our government and private institutions, a public trial (and flogging if I had my way) of all these corrupt, greedy bastards is essential.

Whatever penalties they pay will still be insufficient for all the grief they have caused many individuals and the damage they have done to our society and economy at large. Anyone have a rope?

[MyLessThanPrimeBeef]

About time, but the hoi polloi could use other suits, like one against Greedspan for reckless bubble making without permit and attempted murder of the English language, and another against Bin Lackey for inflation mongering and lewd conduct with known associates of the Wall Street Gang.

[E]

It's too bad that we don't allow cruel and unusual punishment in this country.

[eg]

Oompa loompa doompety doo
I've got a perfect puzzle for you
Oompa loompa doompety dee
If you are wise you'll listen to me

What do you get when you underwrite foolish loans
Subprimes, Alt-A's, Option Arms make you moan
What are you at, getting terribly lax
What do you think will come of that

I don't like the look of it

Oompa loompa doompety da
If you're not greedy, you will go far
You will live in happiness too
Like the Oompa Loompa Doompety do
Doompety do

[Nelcisco]

Well said Robert in Palm Springs. A public flogging would be exactly what these rat bastards need. If Mozilo was lucky maybe he'll get off by way of death Ken Lay style. I regret to say that about another human being but good honest people get f...ed all the time while these corporate "fat cats" that do business in a wreckless manner do it with impunity. It's great to know that there's still public outrage through all of you against people like this.

Oh...Just in case someone responds by saying "you're jealous because Mozilo walked away w/$100M & not you", because I've read it before when Mozilo was criticized. All I'm saying is that when one serves the public on that level there needs to be a heavy accountability,If you have your R.E. licence go back to the CODE & ETHICS section of your exam, we need to act in a manner that has the pubic interest in mind, and the Jeffrey Skilling of mortgage banking and "boys" should of known better. THATS ALL

[Lou]

As a person who worked for a major wholesale mortgage lender based in SoCal, I can tell you that all execs knew of lax underwriting and fraud going on.

All the witnesses are out there, the sales and operations staffs. These execs are no better than the Gambino crime family. They lended money to people they knew could not pay them off just to get rich. How's that different than a loan shark? These people should be prosecuted under the same RICO statutes they prosecuted the Mafia, those Rampart Cops, and Enron execs under. All the CEOs of these lenders should be behind bars.

And I do think the homeowner is responsible too. Just like a gambler who goes to the sharks. But the sharks still go to jail.

[Maggie Knowles]

I love this paragraph regarding materially false and misleading statements leading to re-election of Mozila and others to board and amending their incentive compensation plan:

3. Proxy Statements
The Complaint alleges that proxy statements for the annual shareholder’s meetings in 2005, 2006, and 2007 were likewise materially false and misleading. The 2005 statement, for example, filed April 29, 2005, sought a vote in favor of re-election of Mozilo, Kurland, Robertson and Russell to the Board as well as approval of an amended Annual Incentive Compensation Plan. Id. ¶307. It did not, however, disclose that reported figures were boosted by reliance on risky products to inflate short-term performance. Id. ¶¶307-309. Had shareholders known of these “undisclosed fundamental changes to the Company’s business model,” Plaintiffs contend, the relevant Defendants would not have been re-elected. Id. ¶¶308-309. The 2006 and 2007 statements were similarly misleading, and, in addition, contained misleading statements about the effectiveness of Countrywide’s compensation policies and financial performance. Id. ¶¶310-318.