A federal judge rejected class certification for more than 500,000 borrowers who say predatory lending schemes made them fall victim to “toxic” adjustable-rate or subprime-mortgage loans offered by Countrywide and Bank of America.
In their consolidated class action, which alleges RICO violations, unfair competition and other claims, homeowners say that Countrywide and other lenders engaged in a scheme to steer borrowers into “inherently toxic and unaffordable” loans that were then bundled and sold as investments on the secondary market as “mortgage-backed securities.”
While all 500,000-plus class members fell victim to the underlying “scheme,” U.S. District Court Judge Dana Sabraw in San Diego found that the dissimilarities in the victims’ cases are so widespread that class resolution is not workable.
Regarding the RICO claim, Sabraw noted that Countrywide made loans through four divisions, two of which worked through 30,000 independent brokers who had no contact with the bank. These brokers issued almost half of the class loans and used no Countrywide-provided script. Loan officers in a third division used scripts, while a fourth division did not. For this and other reasons, the RICO and unfair-competition claims fail due to lack of a “common course of conduct.”
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