Banking Law

Colorado Gets Its Piece of Countrywide's Hide

Colorado Attorney General John Suthers, a Republican, held a press conference today to promote himself announce a settlement with every politician's favorite mortgage lending punching bag, Countrywide. The State of Colorado had sued Countrywide over its marketing practices of subprime mortgage loans, which allegedly violated Colorado's Consumer Protection Act. I'm not privy to any of the facts, but based solely upon my previous experiences, settling for $6 million and turning off the billable hourly clocks of the legion of defense counsel has got to end in a net win for Countrywide.

I assume that this is part of the massive settlement first announced in October with eleven other states. At that time the total estimated cost to Countrywide, assuming all 50 states eventually joined in the settlement, could hit $8.7 billion. Colorado's $6 million is chump change compared to California's $3.5 billion and Illinois' $190 million, but perhaps its equivalent on a per-borrower basis.

A funny thing happened to Attorney General Suthers. A Democrat hijacked the press conference to announce that he was going to introduce one of those great "foreclosure moratorium laws" that we've grown so fond of, and that have done absolutely nothing for delinquent borrowers and their lenders other than either increase the amount ultimately owed by the borrower or compound the lender's ultimate loss.

During the event, Rep. Mark Ferrandino, D-Denver, announced he plans to introduce legislation that will give borrowers 20 days after they receive foreclosure notices to notify the Foreclosure Hotline. If the counselor concludes the borrower can be helped, the homeowner will get an extra 90 days to work with the bank to figure out how, if possible, to stay in the home.

Ferrandino said that he received input from lenders on the bill, which he said was intended to encourage homeowners and lenders to get on ?the same page.? He characterized the legislation as a win-win proposition, since lenders lose money when homes go into foreclosure.

Suthers, a Republican, later clarified that he hasn?t had a chance to review Ferrandino?s bill, which is supposed to be formally introduced to the House later on Monday. The bill?s Senate co-sponsor is Sen. Morgan Carroll, D-Aurora.

Colorado Gov. Bill Ritter moderated the news conference.

Ritter, also a Democrat, likely got a chuckle out of Suthers' later backpedaling "clarification." I imagine a few Colorado Republican legislators asked him what he was doing hosting a joint press conference with a Democrat pushing legislation that Republicans are likely to oppose. Here's a suggestion for John: next time you do a press conference, host it yourself.

Full post as published by Bank Lawyers Blog on February 09, 2009 (boomark / email).