Lender probed in Pa.
PITTSBURGH — The Justice Department can subpoena documents and question officials of Countrywide Financial Corp. under oath to determine whether the lender abused borrowers and the bankruptcy court process in cases filed in Western Pennsylvania, a federal judge ruled.
U.S. Bankruptcy Judge Thomas Agresti said "it certainly has not been proven that Countrywide did anything wrong," but noted that a bankruptcy trustee "has made a showing of a common thread of potential wrongdoing" in several cases.
The cases constitute a representative sample of nearly 300 Pennsylvania bankruptcy cases involving Countrywide borrowers.
The potential wrongdoing warrants further inquiry by a bankruptcy trustee on behalf of the Justice Department, Agresti said.
Countrywide and other mortgage companies have come under scrutiny amid a surge in home loan defaults among borrowers with poor credit histories.
Countrywide, the nation's largest mortgage lender and home loan servicer, has sought to address the growing number of defaults on its books by modifying loan terms, working out long-term repayment plans and other actions.
The company has acknowledged errors in handling some debts, but has denied any systematic effort to thwart bankruptcy protections to collect money.
Some bankrupt borrowers, however, have accused the company of threatening them with foreclosure even after they made payments under court-approved bankruptcy plans that were meant to shield them from Countrywide's subsequent efforts to collect the debts.
Agresti's 50-page ruling was issued late Tuesday in Pittsburgh. A Countrywide attorney did not return a call for comment Wednesday.
Countrywide attorneys had previously argued that the subpoenas were beyond the scope of the bankruptcy trustee's powers and that the trustee's requests to interview Countrywide officials under oath amounted to an illegal "fishing expedition."
Agresti said in his opinion that he retains the power to rein in the trustee to prevent any such abuses.
The decision is likely to speed up legal action taken by federal bankruptcy trustees in Ohio, Florida and Georgia who have sued Countrywide seeking court orders to bar the allegedly illegal practices.
