Countrywide will pay $600M on subprime loan lawsuit
A woman walks past an office of Countrywide banking and home loans in Sun City, Arizona.
TEXT OF INTERVIEW
Bill Radke: One of the most infamous risky subprime mortgage lenders has agreed to settle some of the biggest charges to come out of the financial crisis. A federal judge has approved a $600 million payout by Countrywide Financial to shareholders who were allegedly misled about the company's financial health. Marketplace's Mitchell Hartman joins us live with some details. Good morning, Mitchell.
Mitchell Hartman: Good morning, Bill.
Radke: If Countrywide was at the center of the subprime mortgage boom, how significant is this settlement?
Hartman: Well it's pretty big. Remember, Countrywide was the top housing lender in the nation right when it headed full-on into these risky mortgages that were handed out to anyone with a pulse during the mid-2000s housing boom. And by the time Countrywide was bought by Bank of America in 2008, it was near financial collapse due to the declining housing prices and rising defaults. Now, the company will pay $600 million to shareholders. In this class-action lawsuit, they claimed Countrywide had fraudulently concealed from them just how risky its mortgage portfolio was and how shaky the business was as it was loosening those lending standards. Countrywide, by the way, though, didn't admit any wrongdoing in the settlement.
Radke: Didn't admit wrongdoing. Then why did Countrywide settle?
Hartman: Well, hard to know, we're not in the lawyers' rooms. But in cases like this, its it's pretty hard to know what'll happen if the fight actually goes to the courtroom. Plus, even though Countrywide didn't admit guilt, some shareholders will get big payouts, including city and state pension funds like New York's.
Radke: So does this, Mitchell, mean that Countrywide is now in the clear?
Hartman: No. Countrywide's got lots more legal hours to bill for sure. There's another shareholder lawsuit led by the state of California, there's an SEC investigation, also a Justice Department criminal investigation. And this settlement doesn't cover another big part of Countrywide's business, where it took those risky mortgages, repackaged them, and then sold them to investors as what we've come to know as toxic mortgage-backed securities.
Radke: Ah yes, as our listeners know well by now. Marketplace's Mitchell Hartman. Thank you.
Hartman: You're welcome.