Countrywide in trouble again

Throughout the subprime lending crisis and as foreclosures across the country soar, few mortgage companies have taken heat like Countrywide. Arguably once the most powerful lender in the country, Countrywide has become a favorite of critics, teetered on the verge of bankruptcy and was eventually acquired by Bank of America.

The big problem? Countrywide relied too heavily on subprime loans. The company also made a scores of questionable loans, ones that borrowers struggled to repay. Depending on whom you talk to, Countrywide lenders should have realized that many of the loans they were making were bad ones.

Now, in this story written by Peg Brickley of the Wall Street Journal, Countrywide is again in the news, and again it’s for all the wrong reasons. A Pittsburgh resident is suing Countrywide, accusing the lender of using fabricated evidence in its effort to start foreclosure proceedings on her house.

According to court documents, the homeowner was up to date on her mortgage payments, but Countrywide still threatened to start the foreclosure process if she didn’t pay thousands of dollars more in fees. Countywide later backed off — wisely — and offered to pay the homeowner’s lawyers. But that hasn’t been good enough for the homeowner. She says her credit has been permanently damaged by Countrywide’s foreclosure attempt.

Earlier this week, a bankruptcy court judge rejected Countrywide’s proposal to settle the allegations. Judge Thomas Agresti of the U.S. Bankruptcy Court in Pittsburgh, says he wants to know more about the allegedly false documents that Countywide created.

Does the lawsuit against Countrywide have merit? I can’t say. But I can say that it wouldn’t surprise me. We’ve seen throughout the mortgage industry’s subprime mess, that many — not all, of course, but many — mortgage lenders did not watch out for the consumer. Many lenders got greedy. They pumped up the volume of their originations without first thinking of whether a particular loan was right for the borrower.

So if Countrywide did act improperly in this case, it wouldn’t surprise me a bit. And I’m not just picking on Countrywide here. I wouldn’t be surprised if any lender acted improperly. After all, I can only go by their track records.