Appeals court revives Countrywide homeowner case

Reuters News
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Posted: Dec 29, 2011 5:28 PM
Appeals court revives Countrywide homeowner case

By Jonathan Stempel

(Reuters) - A week after settling a landmark federal discrimination case, Bank of America Corp's Countrywide unit was ordered to face a lawsuit by a Hispanic couple who said it applied excessive pressure to refinance their home on terms they did not accept and could not afford.

In an opinion by a prominent Republican-appointed judge, the 9th U.S. Circuit Court of Appeals in Pasadena, California said a lower court was wrong to dismiss the complaint by Victor and Belen Balderas, who claimed they could not read the English language loan documents they signed.

Countrywide was accused of violating the federal Truth in Lending Act by refusing to let the couple cancel their 2006 refinancing as the law allowed.

The Balderases said a Countrywide broker cold-called them and persuaded them to switch to a mortgage that could let them cash out $50,000, based on documents that overstated their annual income by more than $40,000.

They said the broker soon showed up and demanded they sign the loan documents "that night," refusing to leave their home or reschedule so their English-literate daughter could attend.

They said that after six hours of "unrelenting pressure" they capitulated just after midnight. Over the next two days, the broker and Countrywide wrongly refused their timely request to rescind the transaction, they alleged.

Writing for the 9th Circuit, Chief Judge Alex Kozinski said it was too soon to reject the Balderases' claims that they were not properly advised of their rights regarding rescission.

He said the couple was entitled to prove that they were not allowed to keep copies of the relevant disclosures, which they had supposedly signed and which Countrywide then took away.

Kozinski said it "defies both the purposes of the TILA and common sense" to accept Countrywide's apparent argument that the signatures proved that the Balderases got proper notice.

"When you have pizza delivered, you don't sign for it and let the deliveryman take it back to the restaurant," the judge wrote. "And when a newspaper boy delivers a paper, he doesn't show you the headlines and then return it to the printer."

Kozinski said if the Balderases prove at trial that they were not notified of their right to cancel, "they'll win."

Bank of America and a lawyer who argued the case on its behalf did not immediately return calls seeking comment.

Kevin Griffith, a lawyer for the Balderases, said: "We are happy with the decision. It's going to open the door for the case to be heard on the merits."

On December 21, Countrywide agreed to pay $335 million to settle U.S. Department of Justice charges that it discriminated against minority homebuyers, including by charging them more and steering them to costlier loans.

Justice Department officials called that accord the largest residential discrimination settlement in U.S. history.

Countrywide was once the largest U.S. mortgage lender. Bank of America bought that company in 2008.

The case is Balderas v. Countrywide Bank NA et al, 9th U.S. Circuit Court of Appeals, No. 10-55064.

(Reporting by Jonathan Stempel in New York; Editing by Steve Orlofsky)