State Regulators Issue Conditional Renewal of Countrywide Home Loans, Inc.

Business will be limited to reworking existing mortgages

CHICAGO – State regulators today issued a conditional license to Countywide Home Loans, Inc. of Calabasas, Calif. that will allow the lender to meet its obligations under the multi-state agreement it reached with the Illinois Attorney General and those of several other states.  The Illinois Department of Financial and Professional Regulation (IDFPR) will only allow the company to restructure loans for families that already have loans with Countrywide.  The company will not be allowed to offer mortgages to new customers and will be monitored on a monthly basis to ensure it is complying with the terms of the settlement for current customers.

“Because Countrywide has entered into a multi-state agreement, we have decided to extend its license to operate in Illinois for an additional year, as long as they meet the new license requirements,” said Dean Martinez, Secretary, IDFPR.

Since 1981, Countrywide has held 131 licenses for offices in Illinois.  In recent years it has failed to meet the basic requirement of the Residential Loan Act which requires licensees to be able “to command the confidence of the community and to warrant belief that the business will be operated honestly, fairly, and efficiently.”   In its order (below), IDFPR noted that Countrywide has committed various actions in numerous states that led to the decision to limit Countrywide’s business activities. 

ORDER RENEWING LICENSE WITH CONDITIONS

The Illinois Department of Financial and Professional Regulation, Division of Banking (the “Department”) hereby issues this order with respect to the application of Countrywide Home Loans, Inc. (Countrywide) for renewal of residential mortgage license number MB.0000139. 

LEGAL STANDARD

1.         To grant or renew a license, the Department must make “positive findings” that the “financial responsibility, experience, character, and general fitness” of the applicant “are such as to command the confidence of the community and to warrant belief that the business will be operated honestly, fairly, and efficiently.”  205 ILCS 635/2-2(6) (emphasis added); 205 ILCS 635/2-5(3).

2.         The Department shall refuse to renew a license if “it is determined that the applicant is not in compliance with any provisions of the Act.”  205 ILCS 635 2-5(1).

3.         The Department “may impose conditions on a license if the [Department] determines that the conditions are necessary or appropriate.”  205 ILCS 635/2-2.

FACTUAL FINDINGS

4.         Countrywide Home Loans, Inc. is an Illinois residential mortgage licensee holding inactive lapsed license number MB.0000139 and located at 4500 Park Granada, Calabasas, California 91302.

5.         Several states, including Illinois (Docket No. 08CH22994), have taken regulatory, enforcement, and/or legal actions against Countrywide for unlawful lending practices.  See, e.g., California (Docket No. LC081846), Florida (Docket No. CACE08030105), Indiana (Cause No. 76C01-0808-PL-0652), Washington (Department of Financial Institutions, Division of Consumer Services, No. C-08-030-08-SC01), and West Virginia (Civil Action No. 08-C-268).

6.         In August 2008, the FBI arrested a former Countrywide employee who is believed to have sold the personal financial information, including social security numbers, of up to two million customers.  The former employee sold customer files in batches of 20,000 about every week for $500 per batch (2.5 cents per customer).

7.         The housing crisis and a myriad of scandals have severely damaged Countrywide’s reputation in the community.  See, e.g., Jonathan Weisman and Dina ElBoghdady, Countrywide Gave Special Treatment to Lawmakers, N.Y. Times, June 14, 2008, at A1; Carl Gutierrez, Countrywide Falls on Abandonment Fears, Forbes.com, May 5, 2008 (referring to Countrywide as the “poster child” for the housing crisis). 

8.         Countrywide violated the Act and was fined $185,000 by the Department on March 18, 2008 (Order # 2008-MBR-34), for closing 21 branches without providing proper notice to the Department.

9.         On July 1, 2008, Bank of America acquired Countrywide Financial Corp., Countrywide’s parent company.

10.       On October 6, 2008, Bank of America announced that it had agreed to settle claims brought by various states, including Illinois, regarding certain loans originated by Countrywide Financial Corp. and its subsidiaries.  (This settlement is referred to below as the “Multi-State Settlement.”)

LEGAL FINDINGS

11.       Countrywide violated the Act by closing 21 branches without providing proper notice to the Department.

12.       By no reasonable estimation does Countrywide “command the confidence of the community.”  See 205 ILCS 635/2-2(6).  Therefore, it is impossible for the Department to make “positive findings” about the Company sufficient to warrant the unconditional renewal of its license.  See id. 

13.       Bank of America’s acquisition of Countrywide and the Multi-State Settlement suggest that the Company may “be operated honestly, fairly, and efficiently” over the course of the next year. See  205 ILCS 635/2-2(6).

14.       Under the above circumstances, it would be “necessary [and] appropriate” to renew Countrywide’s license only subject to strict conditions.  See 205 ILCS 635/2-2(a).

NOW THEREFORE IT IS HEREBY ORDERED:

The Department hereby renews residential mortgage license number MB.0000139 for the period of May 1, 2008, to April 30, 2009, subject to the following conditions:

1.         As of the date of this order, Countrywide shall not take any new residential mortgage loan applications for Illinois residential real properties.

2.         Countrywide shall be permitted to perform licensable activities with respect to any pre-existing Illinois residential mortgage loans as of the date of this order, including, but not limited to, the mandatory loan modification program to assist Illinois homeowners pursuant to the Multi-State Settlement.

3.         Countrywide shall identify to the Department on the first business day of each month the loans it has restructured for Illinois homeowners under the Multi-State Settlement or any voluntary loan modification programs undertaken by the Company.

4.         Countrywide shall comply with all requirements of the Act and rules promulgated thereunder and all Department requests arising therefrom during the period of licensure.

The Department will make an administrative determination at the end of the period of this conditional license whether to renew the license, with or without conditions, based upon the legal standards provided under the Act.

This constitutes a final administrative order subject to Section 4-12 of the Act and the rules promulgated thereunder.

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