Brown: Countrywide talks 'ongoing and intensive'
Jerry Brown (D)
SACRAMENTO, Calif. (Legal Newsline)-California Attorney General Jerry Brown confirmed Friday that he is in ongoing negotiations with Bank of America, the parent company of Countrywide Financial Corp., over the mortgage company's alleged misconduct in its lending practices.
Brown, a Democrat, was the first of several state attorneys general to file a lawsuit against Countrywide.
He told Legal Newsline on Friday that he is in negotiations with Bank of America executives. He said the talks are "ongoing and intensive."
He added they were "about in the middle" of the process, even as others working to help homeowners avoid foreclosures expressed criticism of the attorney general's tactics.
"We believe the attorney general is stonewalling," Greenlining Institute General Counsel Robert Gnaizda told Legal Newsline on Friday. "We believe he is contemplating a settlement that will not help the more than 200,000 Countrywide borrowers in California who are facing foreclosure."
The Greenlining Institute, along with The California Reinvestment Coalition, wrote Brown in early August asking the attorney general to seek a preliminary injunction temporarily blocking Countrywide from foreclosing on homes.
Brown would not comment on whether his talks with Bank of America include discussion of a moratorium, saying only he needed to look at the legalities of that more closely.
Gnaizda said Brown is ducking the issue.
"The attorney general is well aware," he said, "that his allegations in his complaint make it possible for him to immediately get a preliminary injunction declaring a foreclosure moratorium on all fraudulently induced mortgages."
The Greenlining Institute describes itself as a multi-ethnic policy research and advocacy organization.
Gnaizda said the California attorney general's office has neither called him nor responded to his letter.
Bank of America officials did talk to Gnaizda on Thursday, he said, saying they told him that they were opposed to a moratorium, that it would be harmful to the economy and harm borrowers.
"When asked if they had an alternative solution," Gnaizda said, "they said 'not yet.'"
Gnaizda said The Greenlining Institute offered to fly at to Bank of America's home office in North Carolina at its own expense to meet with Chief Executive Officer Ken Lewis and discuss possible solutions.
"They are taking it under advisement," Gnaizda said
The Greenlining Institute has met before with Bank of America. In 2005, Gnaizda said he met with Lewis to discuss concern over credit card spending.
Gnaizda said efforts to obtain a preliminary injunction will continue.
San Diego City Attorney Mark Aguirre told Legal Newsline on Thursday that he is preparing to file the preliminary injunction against Bank of America.
Aguirre may also ask the city to declare a state of emergency at a September city council meeting, according to Gnaizda. Aguirre called the crisis an emergency on Thursday.
"The difficulty I see," Aguirre said, "is that it is not being treated as an emergency problem by the Attorney General or Bank of America."
The pair of moves by Aguirre would start a tsunami of support for obtaining a moratorium on foreclosures, Gnaizda said.
"If Aguirre got the injunction," Gnaizda said, "the pressure on the attorney general to seek the same would be overwhelming. The AG would be forced by the legislature to take action immediately. Moreover citizen groups could file that the AG take action."
The Greenlining Institute said it would give Brown two weeks from the date Aguirre files for a preliminary injunction to act.
"Greenlining will intervene," Gnaizda said. "If City Attorney Aguirre gets an injunction and the attorney general does not follow in two weeks we will file a suit, and I believe we be supported by many state legislators."
Critics of the lawsuits against Countrywide contend the issue has become a political football. The lawsuit or a moratorium against foreclosures, some editorial and bloggers have written, will simply protect homeowners who spent too much on their homes.
"Rubbish," Gnaizda said in response. "The vast majority of Countrywide borrowers who borrowed for their primary place of residence were induced by corporate-led fraud.
That is, they encouraged mortgage brokers to get appraisals 25 or 50 percent over what the homes were worth. They were encouraged them to inflate the income or ignore income in order to put these buyers into unsuitable products."
Gnaizda said that if Countrywide had simply issued traditional 30-year fixed interest rate loans at 6 percent interest, "virtually none would be at risk today." Instead, mortgage brokers were offered increased commissions, Gnaizda said if they sold borrowers more expensive sub-prime or variable loans.