Countrywide To Pay $600 Million Settlement

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Mortgage lender Countrywide has agreed to pay $600 million to settle shareholder lawsuits in the largest subprime-related shareholder settlement to date. Bank of America acquired the company in 2008.

MICHELE NORRIS, host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Michele Norris.

MELISSA BLOCK, host:

And I'm Melissa Block.

A U.S. district judge has signed off on a settlement agreement in which the housing lender Countrywide Financial and its auditor, KPMG, agreed to pay a combined $624 million.

As NPR's Yuki Noguchi reports, this is the biggest payment yet to settle a shareholder suit leading to the subprime housing crisis.

YUKI NOGUCHI: The case against Countrywide alleged the company failed to alert investors about the risks of its lending practices during the housing bubble. Its failure to do so meant Countrywide investors were left in the dark about risky subprime loans that essentially brought down the business.

Countrywide said it settled the case to spare itself the additional legal expenses. It denies the allegations of wrongdoing, saying it discloses risks to investors in regulatory filings. As part of the deal, Countrywide will pay $600 million. KPMG's share is $24 million.

Charles Elson is director of the Weinberg Center for Corporate Governance.

Mr. CHARLES ELSON (Director, Weinberg Center for Corporate Governance): Every debacle produces large settlements at some point or another.

NOGUCHI: Elson says the size of the settlement indicates the companies wanted to avoid a trial and possibly that they were not sure they would win in court.

Mr. ELSON: I think there's clearly a desire on the part of the surviving companies to move on. The greater the controversy, the greater the dollar value of the settlement.

NOGUCHI: Countrywide has paid in many other ways for its risky business bets. What was once the nation's largest mortgage lender was forced to sell itself at a deep discount to Bank of America.

Countrywide's former chief executive, Angelo Mozilo, and other executives face ongoing fraud suits brought by the Securities and Exchange Commission. Settlements relating to the fall of the housing market are commonplace these days. Former executives and directors of another lender, New Century, recently paid to settle claims against that company.

Yuki Noguchi, NPR News, Washington.

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