The subprime mess: Class action suit revived in Countrywide case Thursday, October 29, 2009
Countrywide Financial Corp. is subject to a class action lawsuit based on allegations of a kickback scheme in which homebuyers were required to buy mortgage insurance from companies that in turn bought reinsurance from Countrywide subsidiaries. Attorneys for the plaintiffs say Countrywide, now part of Bank of America, could face liabilities in the hundreds of millions of dollars in a class action that could involve tens of thousands of plaintiffs.
A lower court had ruled the plaintiffs were not entitled to sue under the Real Estate Settlement Procedures Act (RESPA) because they could not show they had been overcharged for mortgage insurance as a result of the alleged kickback scheme. But after the U.S. Department of Justice joined in the appeal, the 3rd U.S. District Court of Appeal ruled unanimously that such a scheme would be a clear violation of RESPA’s anti-kickback provisions, and as a result consumers do not have to prove they were overcharged to qualify for damages.