The US Justice Department has dropped plans to sue the former head of Countrywide Financial, a driver of the subprime mortgage debacle behind the 2008 financial crisis, his lawyer said Friday.
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“We are gratified by the Department of Justice’s determination to close its investigation without litigation”, Mozilo attorney David Siegel said in an email.
The SEC had accused Mozilo and other former Countrywide executives of downplaying the risks of subprime and other high-risk mortgages they were writing to homeowners and selling to investors. Countrywide grew exponentially through the years until it became the largest USA mortgage lender by writing up riskier and riskier loans.
Mozilo hardly got off easy when the Securities and Exchange Commission ordered him to pay $67.5 million in 2010 to settle another civil case regarding conduct by Countrywide.
In 2008, however, Bank of America acquired Countrywide for $4 billion after a large volume of Countrywide loans defaulted.
Patrick Rodenbush, a spokesman for the Justice Department, declined comment.
But the view has now prevailed at Justice that the evidence isn’t so solid against Mozilo that it’s worth going after him.
Federal prosecutors had launched a criminal investigation but shelved that inquiry in 2011 after deciding Mozilo’s actions did not amount to criminal wrongdoing.
In 2014, the Justice Department began trying to build a civil case against Mozilo, using the same anti-fraud laws it had employed to extract more than $37 billion from Wall Street banks, people familiar with the situation have said. In the run-up to the financial crisis, Countrywide and other mortgage companies loosened lending requirements in a race for more business, though Mr. Mozilo’s role in those decisions isn’t clear.
The Justice Department used Firrea to reach a settlement of almost $17 billion with Bank of Bank of America over how Countrywide and Merrill Lynch & Co. – which the bank bought in 2009 – marketed mortgage-backed bonds to investors in the run-up to the financial crisis.
Prosecutors contended that she was part of an effort to push low-quality mortgages to the government-controlled Fannie Mae and Freddie Mac programs.
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Last month a U.S. appeals court threw out a almost $1.3 billion penalty against Bank of America, concluding the bank had not committed fraud amid the housing bust. That year, Countrywide, based in Calabasas, California, reported its first annual loss in more than two decades.
