The state of California has agreed to settle a predatory lending lawsuit which it has filed against two former Countrywide Financial Corp. executives for $6.5 million.
Former Countrywide Financial Corp. CEO Angelo Mozilo and ex-COO David Sambol have agreed to pay $6.5 million to the state government to settle a predatory lending suit filed by the state attorney general's office in June 2008 against the company and its executives.
Countrywide, Mozilo and Sambol were accused of luring borrowers with low teaser rates on adjustable-rate loans. The loan officers, the prosecutors said, didn't explain the details of the loans and as a result, thousands of homeowners ended up in default and foreclosure.
The case was settled in October 2008 and Countrywide had agreed to provide loan modifications and other foreclosure relief valued at $8.68 billion nationally, including $3.5 billion in California.
Last October, Mozilo had agreed to a $67.5 million settlement with the U.S. Securities and Exchange Commission (SEC). The SEC had accused Mozilo of selling $140 million in Countrywide shares from November 2006 through October 2007 at an inflated price because he hadn't disclosed the increasing risk he knew the lender faced from defaulting mortgages. As part of the settlement, Mozilo did not admit any wrongdoing.
Mozilo and Sambol left the company when Bank of America Corp. bought Countrywide in July 2008.
As per the settlement filed Wednesday in Los Angeles Superior Court, Countrywide will pay $6.5 million to a Foreclosure Crisis Relief Fund.
State Attorney General Kamala Harris said the fund will provide restitution and relocation assistance for foreclosed homeowners, loan modification services and money for local agencies to prosecute mortgage fraud.
Meanwhile the lawyers for Mozilo and Sambol said their clients were innocent.
Evidence and witnesses confirmed that Mr. Mozilo is a man of integrity who would not personally engage in or authorize any deceptive practice, and thus, the allegations made against him had no basis in fact, Mozilo's lawyer, David Siegel, said in a statement.
Nevertheless, Mr. Mozilo respected Countrywide's decision to fund this settlement in order to end the on-going costs of litigation, and we are pleased to put this matter behind Mr. Mozilo.
Walter Brown, a partner with Orrick, Herrington & Sutcliffe LLP and counsel to Sambol, also said his client always acted in the best interests of consumers and...always conducted himself honestly and with integrity.
The case is People of the State of California v. Countrywide Financial Corp., 08-cv-04861, U.S. District Court, Central District of California (Los Angeles).