AGs in 2 States Sue Countrywide, Allege Deceptive & Unfair Practices
Updated: The attorneys general of California and Illinois filed lawsuits today against Countrywide Financial Corp., claiming that the mortgage lender engaged in deceptive and unfair practices.
Meanwhile, in third announcement today the governor of Washington state, Christine Gregoire, says it plans to fine the mortgage lender for allegedly discriminating against minority borrowers, reports Bloomberg.
At a press conference, the attorney general and former governor of California, Edmund Brown, accused Countrywide of deceptive, unfair and “corrupt” lending practices, reports the Wall Street Journal. “In many instances, we believe the brokers outright lied,” Brown said.
Although claiming to help customers find the best loan terms, Countrywide mortgage representatives “marketed complex and difficult-to-understand loans with very low initial or ‘teaser’ interest rates or payments” that would inevitably go up, the California attorney general’s office says in a press release. Monthly payment increases could be especially steep if customers took advantage of loan options that often allowed them to repay less than the monthly interest on the mortgage, leading to negative amortization.
“Countrywide employees, including loan officers, underwriters, and branch managers—who were under intense pressure to process a constantly increasing number of loans—misrepresented or obfuscated the fact that borrowers who obtained certain types of loans would experience dramatic increases in monthly payments,” the press release states. It also says that loan representatives misrepresented the dangers of mortgages to borrowers by “dramatically easing underwriting standards” and thus allowing individuals to take out mortgages they couldn’t afford to repay.
The 46-page complaint filed by Brown in California state court also names Countrywide Chairman and Chief Executive Angelo Mozilo and President David Sambol as defendants.
In Illinois, Attorney General Lisa Madigan filed a similar complaint (PDF) in state court there, against Countrywide, various subsidiaries and Mozilo (but not Sambol). It contends that the defendants “in a single-minded quest to dominate the nation’s mortgage market, sold risky and costly loan products to borrowers who could not afford them,” as a press release from Madigan’s office puts it.
“Countrywide’s unfair lending practices have harmed tens of thousands of borrowers who’ve been placed in unaffordable loans and, as a result, our communities are now being destabilized by a skyrocketing number of home foreclosures,” Madigan says in the press release.
Related coverage:
ABAJournal.com (2007): “Subprime Crisis Spotlights #1 Lender”
ABA Journal: “Homing in on Foreclosure”
Updated at 4:30 p.m. to include press release information from Madigan’s office.
