More states have filed charges against Countrywide (NYSE: CFC) for aggressive marketing and giving loans which were highly risky. Washington and California have joined Illinois in the actions.
Up until now, Bank of America (NYSE:BAC), which is buying Countrywide, has been sticking to its story that it will close on its purchase of the mortgages company. The media has written a million times that the big money center bank might pull out of the deal. That actually became a bit more likely with the new states' actions.
According to The Wall Street Journal, Kurt Eggert, a law professor at the School of Law at Chapman University said, "Countrywide could be required to give back its profit on all those loans and conceivably give back houses on which it has foreclosed." Since that number could be well into the billions of dollars, the potential damages are rising fast.
Countrywide could spend tens of millions of dollars on legal fees and countless hours in court over the next several years. That has become much clearer in the last few days.
BAC would be better off to let CFC go out of business and just buy its assets. Maybe the bank never intended to close the deal. Maybe that was its plan all along.
Douglas A. McIntyre is an editor at 247wallst.com.
