The Superior Court of California County of Los Angeles [official website] on Wednesday approved [opinion, PDF] a $6.5 million settlement between the state of California and two former Countrywide Financial Corporation executives accused of predatory lending. The lawsuit alleged that Countrywide lured borrowers with low teaser rates prior to the mortgage crisis. The loan officers did not warn borrowers of the downside of these loans, leading tens of thousands of homeowners into foreclosure. Following the settlement, Attorney General Kamala D. Harris [official website] announced [press release] that the money would be used to a establish a statewide Foreclosure Crisis Relief Fund, which will help California residents affected by the mortgage crisis and high foreclosure rates. According to the settlement,
At its discretion, the Office of the Attorney General may use the Fund to cover expenses it incurs in the course of investigating and prosecuting misconduct relating to mortgage origination, mortgage servicing, and foreclosures, and for consumer education regarding mortgage issues...The Office of the Attorney General, at its discretion, may also use these funds to develop and implement programs to help neighborhoods impacted by foreclosure or mortgage default rates.The court will maintain jurisdiction over the matter to ensure that the orders of the judgment are properly carried out.
The decision is among several lawsuits relating to the sub-prime mortgage crisis. Last month, the Massachusetts Supreme Judicial Court [official website] issued a decision [text, PDF; JURIST report] against banks in two foreclosure cases that could have important implications on similar cases both inside and outside of the state. In December Arizona Attorney General Terry Goddard [official profile] filed a lawsuit [JURIST report] against Bank of America (BOA) [corporate website] for misleading customers in mortgage modification and foreclosure practices. Specifically, the complaint [complaint, PDF] alleged that BOA violated a 2009 consent agreement, in which it agreed to develop and implement loan modification programs, by continuing to engage in widespread consumer fraud by misrepresenting to Arizona customers whether they were eligible for modifications of their mortgage loans. Additionally, in July 2010, The US Securities and Exchange Commission [government website] announced [JURIST report] that it charged Citigroup Inc. [official website] with misleading investors about the company's exposure to sub-prime mortgage-related assets and settled with the company [press release] for $75 million.