San Diego Wants to be a Foreclosure Sanctuary, Sues Bank of America Amid Congress Passing Housing Bill
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senate The Southern California housing market has been crushed over the last seven months, as foreclosure rates continue to soar and home prices further depreciate.
The City of San Diego, in an effort to curb the foreclosure problem, has filed a lawsuit against Bank of America and its Countrywide unit. San Diego City Attorney Michael Aguirre said that he hopes to prevent as many foreclosures as possible through this lawsuit and to turn San Diego into a "foreclosure sanctuary."
Countrywide has been accused of writing illegal mortgages, particularly when it came to subprime mortgages and option-ARMs (TILA violations), as the FBI is currently investigating them, IndyMac, and 19 other banks for fraudulent lending practices.
So far this year, 20,000 homes in San Diego County have been lost to foreclosure as borrowers fail to keep up with mortgage payments. This number could easily double by the end of the year.
Mr. Aguirre's lawsuit names four current and former Countrywide officers, including former CEO Angelo Mozilo. The suit alleges that they personally profited from selling shares of the lender's stock while knowing its subprime loans (with TILA violations) didn't comply with company policies (because they were illegal).
According to Yahoo!, Mr. Aguirre said, "The Countrywide executives who originated these subprime loans were engaged in a massive fraud on homeowners, borrowers and investors [. . .] They enriched themselves by over $1 billion [. . .] We have the big stick of being found in violation of the law and the carrot of taking something that is a nonperforming asset, that all these houses are, and making it a performing asset by keeping the families in it," (Yahoo! Finance, 7/23/08).
Bank of America, as they have ubiquitously done in regards to other lawsuits filed against them, made no comment.
Housing Bill
Also, Congress passed their version of the Housing Bill today, which now moves onto the Senate for a vote. Bush has promised not to veto the bill, even though last week he said he would if it included government grants allowing state and local agencies to purchase foreclosed homes (a $4 billion provision).
The provision is still in the bill, and it is likely that Bush chose to back off of his veto threat, due to the fact that a video was leaked on the web showing the president making fun of the housing situation and Wall Street. If not, then the timing is just that much more coincidental, since the president was unequivocal in his remarks on the housing bill just a few weeks ago, and yesterday afternoon, when he guaranteed to veto the bill, if it remained unchanged.