A class action filed on behalf of California fire victims against Countrywide Home Loans was settled November 25, 2009 in Los Angeles Superior Court (Van Der Touw v Countrywide, BC392189).
Based on alleged violations of California‟s Civil Code Section 2954.8, and Business and Professions Code Section 17200, the class action suit claimed that the mortgage lender, Countrywide Home Loans, breached California laws by not paying homeowners the minimum 2% interest on insurance proceeds held by their lender. The code sections apply to state, not federally, chartered institutions.
The practice of withholding interest on monies held from insurance settlement proceeds or escrow account holders amounted to free funds at the expense of diligent homeowners who suffered damages from an insured peril. Individually, no case would have prevailed because any recovery would have been insignificant compared to the costs of litigation.
Countrywide Home Loans, a California corporation, ultimately agreed to fund a class settlement in recognition of past unpaid interest.
Mr. Brian Heffernan, the attorney representing homeowner plaintiffs, commented, “This was a case that reflects our troubled economic times. As most disaster victims already know, financial institutions will go to great lengths to hold [insurance settlement] money as long as possible. Fire victims constantly have to overcome the red tape and hassles to convince the „Loss Draft‟ department to eventually disburse the customers‟ own insurance proceeds necessary to rebuild their homes. This settlement should at least remove one obstacle along the way to rebuild their home.”
Homeowners who borrowed from or held escrow accounts with Countrywide during the period covered by the class action litigation, June 6, 2004 and June 30, 2008, are advised to check their mail for instructions regarding the class action settlement.