$624m BofA Settlement Set for Countrywide Investors
Bank of America [BAC] and auditing firm KPMG agreed Monday to a $624m settlement with investors in Countrywide Financial, after the company mislead shareholders about mortgage lending practices. The settlement required, and now has, approval from the US district courts. According to the complaint, The New York State Common Retirement Fund and five New York City pension funds claimed former Countrywide chief executive officer Angelo Mozilo and other executives hid the fact that the company was fueling its growth by mis-selling mortgages through poor underwriting. Mozilo, 71, was CEO of Countrywide until July 2008, when Bank of America purchased the firm. Before that year, Countrywide had been the largest loan originator for four years running, from 2004-2007, with its peak in 2005 with $490.95bn of mortgages originated -- or 15.7% of the market. Problems and accusations of illegality are nothing new for Countrywide. In early June of this year, the Federal Trade Commission (FTC) pinpointed Countrywide Financial saying the 200,000 bankrupt borrowers were "victimized" by outrageous practices of at two of the mortgage provider's service operation. The FTC ordered that each borrower receive more than $108m in refunds. This case, formally known as Countrywide Financial Corp. Securities Litigation, 07-05295, was reviewed in Los Angeles under U.S. District Judge Mariana Pfaelzer, who granted preliminary approval of the settlement. Bank of America, based in Charlotte, N.C., is responsible for $600 million of the settlement, with New York- based KPMG responsible for the remaining $24 million. Bank of America released an official statement, telling HousingWire that Countrywide denies all allegations of wrongdoing and any liability under the federal securities law. The statement read, "[w]e agreed to pay the settlement to avoid the additional expense and uncertainty associated with continued litigation." Write to Christine Ricciardi. The author holds no relevant investments.