Entries in Countrywide Financial (6)


Bank of America, Countrywide Whistleblower Kept 3-Year Secret

David McNew/Getty Images(NEW YORK) -- Would you be able to keep a secret for four years that was so big it would make the five large U.S. banks pay up about $25 billion in a legal settlement?

Kyle Lagow of Plano, Texas, had to keep a secret even from his wife and five children that he was one of the whistleblowers who led to this year's $25 billion mortgage settlement with banks over inappropriate lending schemes. His lawsuit led to a $1 billion settlement with Countrywide Financial's parent, Bank of America, in February with the U.S. attorney's office. Lagow's suit was finally unsealed under the U.S. False Claims Act in May, when he was awarded $14.5 million, a percentage of the settlement.

Lagow, 50, said the settlement is a "start" in settling improper mortgage practices with FHA-sponsored loans, but that was only 6 to 10 percent of his company's practice.

"The conventional side is massive. I don't know how to put a number on it," Lagow said with a deep Texas drawl. "There were such a large number of loans that went through the machinery. Will Congress do anything and say, 'We need to fix this machinery before it's going to happen again?' Who knows?"

It all started because Lagow was an appraiser from 2004 to 2008 with LandSafe Inc., a subsidiary of the subprime mortgage lender Countrywide Financial.

During his time working at Countrywide, which was purchased by Bank of America in January 2008, Lagow witnessed his company making bad loans on homes with low collateral. During that heyday of housing lending, executives encouraged appraisers to boost home values for sales.

"The game was rigged when you brought the people into it," he said.

Lagow said he tried to make suggestions of how to "fix" the situation.

"You go in there, figure out who was taking advantage of them, you lower the interest rates, make it easier to stay in their homes," Lagow had proposed to the company. "There were three or four things I wanted to do and they looked at me like I was nuts and said, 'No thanks, Kyle. Go back to doing your job.'"

Lagow complained to company executives about the inappropriate appraisal and lending practices, but they didn't find impropriety after investigating the matter, according to the suit.

"If you're an unsophisticated homebuyer, you walk in and all you want is the American dream," Lagow said. "You don't sit down and analyze that they own the appraisal business, mortgage business, and has a joint venture with the builder. No one was looking out for them."

He said he was never given a clear reason for losing his job in November 2008, but that the company "wanted to go in a different direction."

"My suspicion was that they didn't want Bank of America to know what they were up to," he said. "That's just my opinion."

As the recession deepened, and seeing "a lot of people who were damaged" in the housing market, Lagow contacted Hagens Berman LLP in Seattle in the spring of 2009. Lagow said he chose to contact the law firm because it previously filed a related suit against KB Homes.

"I went to them and I said, 'What can I do to help you? How can I help these people get back on track and make them whole?'" Lagow said.

In May 2009, he filed his lawsuit against Countrywide and various executives and it was sealed as part of the wider Department of Justice investigation. He could not speak a word of the lawsuit, the federal probe or that he was trying to help fix a "rigged system" to anyone, while being unemployed and nearly broke.

"If you can imagine being in a bad economy and, all of a sudden, your income dropping to nothing and not being able to tell people or your wife and kids ... it was probably worse on the kids," he said. "Your kids looking at you like you are a failure. A lot of people would have bailed out. It was pretty tough. There were a lot of money issues and lack of money and, in your own mind, you think they're looking at you because you failed."

Three years later, the suit was finally unsealed, allowing Lagow to finally tell his family his secret, as reported by Reuters. He said he sat his family down in May, and explained the lawsuit to them and that it had been resolved.

"I don't think anybody believed until the funds actually hit the bank," he said.

Shayne Stevenson, one of his attorneys, said Lagow deserves the payment he received after all those years of waiting for legal process at professional and personal risk.

"Kyle, like most whistleblowers, did not come to a law firm trying to make a lot of money," Stevenson said. "He came to the firm because he wanted to help homeowners and appraisers who were being mistreated by Countrywide."

Because Lagow couldn't speak with anyone about the lawsuit, he said he was in constant contact with his attorneys, like Stevenson and Steve Berman.

"I bugged them at all hours of the day," Lagow said of Stevenson and an earlier attorney who worked on the case, "and I continued to drive both of them nuts."

He said he is leaving most of the $14.5 million, minus attorney fees and taxes, to his five children, ages seven to 26.

Unemployed for three years and, even at 50 and being hopefully a little bit wiser, Lagow said he is still actively looking for a job.

"There's some organization out there who is going to look at this and say, 'Here's a guy who wants to do things right. We want that person on our team or part of our organization. We want the credibility and we want to say we try to do things right.' I don't know what firm that is because I haven't been able to find it yet," he said.

Copyright 2012 ABC News Radio


Report: Countrywide Gave Discounted Home Loans to Capitol Hill Insiders

Digital Vision/Thinkstock(WASHINGTON) -- A House committee report on the now-defunct subprime lender Countrywide Financial Corporation shows the company tried to win and influence friends in Washington by arranging discounted home loans for some members of Congress, as well as congressional aides and government officials.

The House Oversight and Government Reform Committee reviewed more than 60,000 pages of documents and discovered Countrywide’s special VIP unit arranged discounted loans for a half-dozen current or former members of Congress, key aides and certain government officials.

Congressional investigators say there was no specific favor sought or granted in exchange for the discounted home loans, but Countywide did gain influence on Capitol Hill.  The report shows many of the recipients of the special mortgages were linked to several financial reform proposals that, had they passed, would have prevented some of the issues that led to the collapse of the housing market.

Former Countywide chief executive Angelo Mozillo was never sent to prison for violating federal law, but he did agree to pay $67 million in penalties and never again be involved in running a publicly-traded company.

While Countrywide was giving politicians and other Washington insiders VIP treatment, it was providing just the opposite to average Americans.  A government study in 2010 found that Countrywide improperly imposed fees on people who were late on mortgage payments and were in default.

In 2011, Bank of America, which had acquired Countrywide three years earlier, agreed to pay $335 million to settle charges that Countrywide discriminated against blacks and Hispanics seeking to buy homes between 2004 and 2008.  The Justice Department said at the time that Countrywide regularly charged minorities higher fees and interest rates while steering borrowers into risky subprime mortgages, a major factor in the collapse of the housing market.

Copyright 2012 ABC News Radio


Countrywide Fine Is Largest in History for Loan Discrimination

Jin Lee/Bloomberg via Getty Images(WASHINGTON) -- Bank of America, which now owns Countrywide Financial, agreed to pay more than $300 million -- the largest fine ever of its kind -- to settle allegations of discrimination against African-American and Hispanic borrowers, the Justice Department announced Wednesday.

An investigation looked at 2.5 million loans made during the height of the housing boom in 2004 through 2007 and found, according to Attorney General Eric Holder, "widespread violations of the Fair Housing Act and the Equal Credit Opportunity Act and resulted in African-American and Hispanic borrowers being charged higher rates for mortgage loans solely because of their race or origin."

Assistant Attorney General Tom Perez says black and Latino borrowers who qualified for prime loans were steered toward risky subprime mortgages.

"As a result of these policies and practices, the odds of an African-American or Latino borrower receiving a subprime loan instead of a prime loan were more than twice as high as those for similarly situated non-Hispanic white borrowers," Perez said Wednesday.

The Justice Department said Wednesday what Countrywide did was not criminal, rather a violation of federal civil rights law.  But many disagree and find it difficult to understand how loans ripe with fraud, applications forged and applicants lied to can not result in one elite person at Countrywide being prosecuted. This is the fifth time Countrywide has been targeted for fraud.

The $300 million settlement against the now defunct Countrywide Bank, once the largest home mortgage company in America, means at most the 200,000 discrimination victims in 41 states will get no more than a couple of thousand each in restitution.

Copyright 2011 ABC News Radio


Bank of America Investors to Challenge $8.5 Billion Settlement

PRNewsFoto/Bank of America(NEW YORK) -- A group of bond investors is fighting a proposed $8.5 billion settlement Bank of America struck last week with holders of mortgage-backed securities sold by Countrywide Financial Loans.

According to court documents, the group -- under the name Walnut Place -- is accusing Bank of New York Mellon, trustee on the mortgage securitizations for Bank of America, of having "serious conflicts of interest" that would compromise the fairness of the deal.

"Walnut Place has serious concerns about the secret, non-adversarial and conflicted way in which the proposed settlement was negotiated and about the fairness of terms of the proposed settlement," the court filing stated.  

Walnut Place wants investors to be able to opt out of the proposed agreement, should they choose, the court documents said.

The group of 11 investors argues that "the $8.5 billion that Countrywide and BofA have agreed to pay is therefore only a small fraction of the potential liability that they would have faced in litigation on half of the trusts."

Copyright 2011 ABC News Radio


Issa Subpoenas Bank of America over 'Sweetheart' Mortgages

Photo Courtesy - Bank of America(WASHINGTON) - Rep. Darrell Issa, R-Calif., Wednesday issued his first subpoena as chairman of the House Committee on Oversight and Government Reform to Bank of America in an effort to obtain all documents and records related to Countrywide’s VIP program.

The move is Issa’s latest effort to obtain names of current and former federal, state and local policymakers – including members of Congress – who potentially received sweetheart mortgage deals from the former Countrywide Financial Corp., which Bank of America obtained in 2008.

“Countrywide orchestrated a deliberate and calculated effort to use relationships with people in high places in order to manipulate public policy and further their bottom line to the detriment of the American taxpayers even at the expense of its own lending standards,” Issa said in a statement.  “This subpoena will allow us to obtain the information needed to answer the outstanding public interest questions regarding the full size and scope of the VIP program."

According to the committee, the subpoena compels Bank of America to produce certain documents by noon on March 7, 2011. Among those documents are all those related to covered borrowers serviced by Countrywide Financial through the Branch 850, VIP, or Friends of Angelo programs.

The term "covered borrowers" means that at the time of the loan, the borrower or their spouse were a current or former officer or employee of a federal agency, the U.S. Congress, a government-sponsored enterprise or of a state or local government.

Copyright 2011 ABC News Radio


Former Countrywide CEO to Pay Record Fine

Photo Courtesy - Getty Images(WASHINGTON) -- Former Countrywide Financial CEO Angelo Mozilo will pay a record $67.5 million to settle fraud charges with the federal government, the Securities and Exchange Commission announced Friday.

Mozilo is accused of having deliberately misled shareholders by failing to disclose the high risk loans his company – once the country’s largest mortgage lender – was making at the height of the financial crisis.

The settlement is the largest-ever SEC penalty to be paid by a company’s senior executive.

“This record penalty is a fitting outcome for a corporate executive who deliberately disregarded his duty to investors by concealing what he saw from inside the executive suite at Countrywide,” said Robert Khuzami, Director of the SEC’s Division of Enforcement.

Two other former Countrywide executives – former chief operating officer David Sambol and former chief financial officer Eric Sieracki – will also pay fines.

By settling, the individuals neither confirm nor deny wrongdoing in the case.

Copyright 2010 ABC News Radio

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