Home The Latest State sues Countrywide for $14 million

State sues Countrywide for $14 million

| Print |  Email
The Latest
Wednesday, January 26, 2011

By Ben Jacklet

Oregon has filed two lawsuits against the infamous subprime mortgage lender Countrywide in an attempt to recover $14 million in losses to the state's pension and worker's comp funds.

The state bought and sold Countrywide shares on behalf of the public employees retirement fund and the SAIF worker's comp investment fund during the height of the subprime madness, between 2004 and 2008. But they didn't sell quickly enough.  Attorney General John Kroger and State Treasurer Ted Wheeler argue that Countrywide misled investors about the high risk of its mortgages.

The state was due to receive $500,000 as part of a national class action settlement but Kroger and Wheeler elected to reject that settlement and to file their own lawsuits. Their complaints allege that Countrywide made "numerous statements of material facts in reporting its financial results" while aggressively selling risky products for short term gain. One high risk product that brought short term gains and long term disaster was the "pay-option" adjusted rate mortgage, which led frequently to negative amortization. The longer the borrower held the loan, the more he or she owed on it.

Not surprisingly, Countrywide went down in flames during the subprime meltdown. Bank of America bought up the remains in January 2008.

At least some of the resulting mayhem could have been avoided. The Oregon complaints, filed today in Multnomah County Court, offer numerous examples of Countrywide executives expressing deep concerns about big risks internally. The company's chief risk officer directly warned his colleagues about "high expected default rates and losses." But those concerns never made it out to investors until it was too late.

Ben Jacklet is managing editor of Oregon Business.

 

More Articles

November/December Preview: Revenge Forestry

News
Tuesday, October 14, 2014
BY JONATHAN FROCHTZWAJG

Seneca AW46A flare-up in the Elliott Forest raises questions about détente in Oregon’s timber wars.


Read more...

Back to School

September 2014
Wednesday, August 27, 2014
BY LEE VAN DER VOO

By now we’ve all read the headlines: Starbucks is giving away free degrees. Except it isn’t.


Read more...

Shipping News

September 2014
Tuesday, August 26, 2014
BY JENNIFER MARGULIS

In 2012 The Dalles, a city of some 14,400 located 75 miles east of Portland and often seen as the poor cousin to adjacent Hood River, completed a massive project to revitalize its dock.


Read more...

A Taste of Heaven

September 2014
Tuesday, August 26, 2014
BY VIVIAN MCINERNY

Craft beer comes to Mount Angel.


Read more...

Podcast: Interview with Pete Friedes

Contributed Blogs
Wednesday, August 27, 2014

082714-thumb friedesbookTom Cox interviews Pete Friedes, author of "The 2R Manager," about becoming a Best Boss.


Read more...

Podcast: Turn Things Around with David Marquet

Contributed Blogs
Friday, October 17, 2014
davidmarquet thumbBY TOM COX | OB BLOGGER

How can you move from a command-and-control leadership model to one of true empowerment and accountability? David Marquet did, and he took notes along the way.


Read more...

Semiconductor purgatory

News
Monday, October 06, 2014
roundup-logo-thumb-14BY LINDA BAKER | OB EDITOR

Intel's manufacturing way station; Merkley's attack dog; Diamond Foods gets into the innovation business.


Read more...
Oregon Business magazinetitle-sponsored-links-02
SPONSORED LINKS