Lawsuit Against Countrywide to Proceed
(Update 1: expands discussion of subprime-linked lawsuits) A federal court in the Southern District of California, San Diego dismissed a motion from Countrywide Financial to throw out a class action lawsuit brought against the nation's largest mortgage lender. Plaintiffs allege Countrywide, now owned by Bank of America Corp. (BAC), steered borrowers into risky and inappropriate subprime mortgages without regard to their likelihood to survive the life of the loan. They say this method was used as a way to gain huge profits, and that the lender did not consider the ability of borrowers to repay a mortgage. The suit is one of hundreds of credit-crisis lawsuits that have been brewing over the course of the past two years. A March study from Navigant Consulting found that 576 new litigation matters tied to subprime-related issues were filed in U.S. federal courts during 2008, twice the number filed in 2007 and by themselves exceeding the 559 savings-and-loan cases handled by the Resolution Trust Corporation over its entire six-year existence. The Navigant survey of litigation found that 24% of all subprime-related lawsuits involved borrower class actions against lenders for alleged predatory lending activities. Judge Dana Sabraw denied Countrywide's motion to dismiss, and will oversee the suit as it goes forward under the jurisdiction of the Racketeer Influenced and Corrupt Organizations Act. Countrywide is also charged, on a state-law basis, with engaging in unfair competition and false advertising statutes, as well as unjust enrichment, according to a press statement by the law firm of Whatley Drake & Kallas, which brought the suit on behalf of the plaintiffs. Write to Jacob Gaffney.