BofA Takeover Of Countrywide Gets OK
Countrywide Financial Corp. says stockholders controlling a majority of the mortgage lender's outstanding shares have approved the company's takeover by Bank of America Corp.
Countrywide says more than 69 percent of outstanding shares were voted Wednesday in favor of the transaction at a stockholders meeting in Calabasas, Calif.
The lender says the deal is expected to close on July 1.
Countrywide agreed to sell itself in January for about $4 billion in stock. The deal is now valued at about $2.8 billion, reflecting a decline in Bank of America's stock price over the past six months.
Countrywide is accused of using misleading advertising and other unfair business practices to trick borrowers into taking on risky home loans they didn't fully understand, in a lawsuit filed Wednesday by the California attorney general's office.
The lawsuit stems from information gathered under subpoena after the state launched a probe last year into the troubled company's business.
It also came on the same day Illinois attorney general filed a lawsuit alleging Countrywide engaged in "unfair and deceptive" practices to get homeowners to apply for risky mortgages far beyond their means.
In the complaint filed in Superior Court, California Attorney General Jerry Brown asserts that Countrywide violated the state's unfair business practices and false advertising laws with just about every action it took to market and originate some of the most popular - and potentially risky - types of home loans in recent years.
"Defendants viewed borrowers as nothing more than the means for producing more loans, originating loans with little or no regard to borrowers' long-term ability to afford them and to sustain homeownership," the state claims in the suit, which also names as defendants Countrywide Chairman and CEO Angelo Mozilo and David Sambol, the lender's chief financial officer.
Countrywide did not immediately return a call seeking comment.
The state claims the company misled customers about the workings of home-equity loans and some types of adjustable-rate mortgages, including pay-option loans, "hybrid" interest-only loans and low-documentation loans.
These loan types, which many other lenders offered during the housing boom, featured low initial payments and the potential for sharp increases after a few years. They now account for a large portion of the mortgages that have become delinquent or gone into default in the past year.
The lawsuit alleges Countrywide obscured the potential risks in the loans, misled consumers about payment terms, prepayment penalties and other obligations, and told borrowers they would be able to refinance before the interest rate on their loans adjusted.
"Defendants knew, or by the exercise of reasonable care should have known, that these statements were untrue or misleading at the time they were made," the lawsuit states.
As the nation's largest mortgage lender and servicer, Countrywide has been under scrutiny by federal and state authorities. It also faces numerous other lawsuits related to its lending practices.
The Calabasas, Calif.-based lender agreed in January to sell itself to Bank of America for about $4 billion in stock. The acquisition, now valued at around $2.8 billion, received clearance from the Federal Reserve earlier this month.