California Attorney General Kamala Harris on Wednesday announced a $6.5 million settlement of a predatory lending case against former Countrywide Financial Corp. Chief Executive Angelo Mozilo and former President David Sambol.
The money will help establish a statewide foreclosure crisis relief fund. Harris noted that in the 18 months prior to October, 282,000 California homes went into foreclosure, and in the last three months of the year notices of default were filed on another 70,000.
This is the second settlement reached by the state in connection with Countrywide’s lending practices. Gov. Jerry Brown, while still attorney general in 2008, reached a settlement with Bank of America, which had acquired Countrywide earlier that year. The bank agreed to roughly $1.3 billion in modifications to loans made to California borrowers. It also paid $28 million to residents who lost their homes to foreclosure.
"Our prior settlement with Countrywide provided restitution for foreclosed homeowners and set in motion loan modification programs that have helped tens of thousands of consumers," Harris said in a statement. "We will use the current settlement to help Californians affected by the mortgage crisis by providing grants to help homeowners facing foreclosure with relocation assistance and providing money to state and local agencies to prosecute mortgage fraud."
Once among Los Angeles County’s highest paid chief executives, Mozilo has faced charges on several fronts that he profited from his company’s loose mortgage lending policies and misled both borrowers and company investors about the risks. In October he agreed to a $67.5 million settlement with the Securities and Exchange Commission to avoid a trial on civil fraud and insider trading charges. Mozilo and Sambol did not admit wrongdoing in that case.
Last month, institutional investors that bought hundreds of millions of dollars in Countrywide's mortgage-backed securities between 2005 and 2007 filed suit in New York State Supreme Court against Mozilo, Sambol and other former executives. Bank of America also is a defendant.
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