Denver-based United Western Bank said Wednesday it has sued Countrywide Financial over $108 million in mortgage-backed investments gone bad.
The lawsuit, filed in Denver District Court on Friday, covers six series of mortgage-backed securities the bank bought from Countrywide between October 2005 and October 2006 at the peak of the housing boom.
United Western claims in its complaint that many of the statements Countrywide made about the securities and credit quality of the mortgage loans backing them in its disclosures were “untrue and inaccurate.”
“If we had known about these issues with respect to the Countrywide mortgage-backed securities, we would have never purchased them in the first place,” said Guy Gibson, chairman of the bank’s holding company. “We intend to pursue legal action against other issuers of mortgage- backed securities which the bank or the company own.”
Bank of America, which purchased Countrywide in 2008, also is named as a defendant, along with UBS Securities and officers at Countrywide.
During the housing boom, loose underwriting standards allowed many borrowers to obtain mortgages they wouldn’t qualify for today, sometimes using stated but unverified income. Those faulty mortgages were pooled together and sold as securities, often accompanied by high credit ratings that later proved unjustified.
Bank of America has written off $5 billion in bad loans because of its Countrywide purchase, according to Dow Jones.
Bank parent company United Western Bancorp. lost $42.5 million last year, much of that tied to write-offs on mortgage investments and in its own loan portfolio. The bank also has had to raise capital to comply with regulatory requirements.
United Western is seeking unspecified damages and wants Countrywide to take the securities back.
Aldo Svaldi: 303-954-1410 or asvaldi@denverpost.com
