Judge: Countrywide ‘Bungling’ Not ‘Full-Blown Bad Faith’

Bankruptcy Law

Judge: Countrywide ‘Bungling’ Not ‘Full-Blown Bad Faith’

Posted Mar 5, 2008, 06:15 pm CDT
By Martha Neil

In a bit of good news for one of the nation's largest mortgage lenders, which has been deluged lately with claims of abusive foreclosure practices, a federal judge in Texas said today that he won't punish Countrywide Financial Corp. for its repeated mistakes in a Chapter 13 consumer bankruptcy case.

Although the lender and its lawyers demonstrated "a disregard for the professional and ethical obligations of the legal profession and judicial system" by proceeding with a claim involving misapplied payments and unexplained and often unauthorized fees, U.S. Bankruptcy Judge Jeff Bohm said he won't fine the Calabasas, Calif.-based Countrywide or its counsel for its conduct in the Chapter 13 case of William Allen Parsley, reports the Wall Street Journal (sub. req.).

Lacking clear and convincing evidence that a persistent pattern of errors was intentional, Bohm writes in an opinion issued today, he is "unable to say their conduct transcended from merely negligent bungling to full-blown bad faith." The 72-page opinion is provided in two parts by the Wall Street Journal. Here is Part 1 (PDF) and here is Part 2 (PDF).

As discussed in an earlier ABAJournal.com post, Countrywide was the subject of three separate U.S. Trustee complaints last week contending that the lender has abused the bankruptcy process with inaccurate filings and unauthorized fees.

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