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Countrywide co-founder won't face U.S. charges over mortgage crisis

houstonchronicle.com | June 19, 2016

By Matthew Goldstein

The Justice Department's pursuit of Angelo Mozilo, one of Wall Street's most recognizable names tied to the subprime mortgage crisis, is ending with a whimper.

After earlier dropping a criminal investigation of Mozilo, federal prosecutors recently decided against filing a civil fraud case against him, said two people briefed on the matter who spoke on the condition of anonymity.

Prosecutors in Los Angeles, in coordination with those at the Justice Department in Washington, spent more than two years reviewing the merits of pursuing a civil fraud case against Mozilo, the co-founder of Countrywide Financial, which was one of the largest originators of subprime mortgages in the run-up to the financial crisis.

Mozilo, 77, and several other former Countrywide executives recently received letters from federal prosecutors notifying them that they had officially ended an investigation into the sale of billions of dollars of mortgages to homebuyers with questionable credit histories, the sources said.

The decision by federal prosecutors not to go forward with a civil fraud case under the Financial Institutions Reform Recovery and Enforcement Act is not surprising, given how long the review process had taken.

Not enough done?

The possibility of the Justice Department filing a so-called FIRREA lawsuit against Mozilo first came to light when Bank of America reached a $16.65 billion settlement of its own FIRREA case in August 2014. The inquiry by the Justice Department of Mozilo was seen by some legal critics as a way for prosecutors to address complaints that little had been done to hold individuals to account for the financial crisis.

Bank of America acquired Countrywide and assumed its liabilities in 2008, as the financial crisis erupted.

But lawyers for Mozilo argued a civil fraud case would be duplicative of the efforts of the Securities and Exchange Commission, which sued Mozilo and two other former Countrywide executives in 2009. On the eve of the trial in 2010, Mozilo and the other defendants reached a settlement that required the mortgage financier to pay $67.5 million in fines and restitution.

Over the past few years, federal prosecutors used the threat of a FIRREA civil fraud lawsuit to extract tens of billions of dollars in settlements from other big banks. The law proved to a be a useful tool for prosecutors because of its 10-year statute of limitations for bringing a case - much longer than the standard three- or five-year statute of limitations for most civil fraud lawsuits.

Verdict overturned

But in May, prosecutors suffered a blow when an appellate court in Manhattan overturned a jury's verdict that had found Rebecca Mairone, a former Countrywide executive, liable under FIRREA. The panel said although Countrywide may have sold flawed mortgages to two government-sponsored mortgage finance firms, there was insufficient evidence that the firm and Mairone had engaged in any deliberate deception.




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CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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