When Bank of America Corp. acquired Countrywide Financial Corp., it hopefully budgeted for legal expenses to contend with lawsuits from former customers. That legal bill is getting bigger since four states, including most recently Connecticut, have sued the lender alleging Countrywide misled borrowers into taking on risky loans that they couldn't afford.
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The other three states that have filed suits, California, Illinois and Florida, are in the top 10 of highest foreclosure filings in the U.S. in the second quarter of 2008, according to RealtyTrac. California was No. 2 with 202,599, Florida was No. 4 with 109,433, and Illinois registered No. 10 with 26,890.
With the mortgage crisis seeming to have no end in sight as more subprime loans are scheduled to reset possibly causing more foreclosures, more states may jump on the bandwagon and file their own lawsuits against Bank of America. That means more money BofA has to spend to defend itself. At some point, BofA executives and investors may wonder, should these lawsuits drag on and more be filed, if the Countrywide deal was really worth it. And while Countrywide so far hasn't been a drag on earnings, will the lawsuits eventually change that? Could Countrywide in the end become a headache BofA could just do without? - Gerald Magpily
See BloggingStocks post
See Dealscape: BofA CEO says Countrywide add will translate to profits
See RealtyTrac press release
