California’s attorney general has filed a civil lawsuit alleging that Countrywide Financial Corp. engaged in deceptive advertising and unfair competition by pushing borrowers into risky loans. The 46-page complaint also names Countrywide chairman Angelo Mozilo and the company’s president David Sambol.
“Countrywide exploited the American dream of homeownership and then sold its mortgages for huge profits on the secondary market,” California attorney general Edmund G. Brown said in a statement.
The lawsuit alleges that Countrywide “viewed borrowers as nothing more than the means for producing more loans” and originated loans “with little or no regard to borrowers’ long-term ability to afford them and to sustain homeownership.” These practices “were created and maintained with the knowledge, approval and ratification of” Mr. Mozilo and Mr. Sambol, it alleges.
The Illinois attorney general’s office, which began an investigation into the business practices of Countrywide last fall, also filed a civil suit against Countrywide and Mr. Mozilo on Wednesday. In a draft of the Illinois complaint obtained Tuesday, the state alleges that Countrywide engaged in “unfair and deceptive practices” in the sale of mortgage loans. The 78-page document says the company loosened its underwriting standards, structured loans with “risky features” and engaged in “marketing and sales techniques” that incentivized employees and mortgage brokers to push loans whether or not homeowners had the ability to repay them.
Illinois Attorney General Lisa Madigan says she is asking that all Countrywide loans originated using “unfair and deceptive” practices be rescinded or modified in some way, even if Countrywide has to repurchase the loans. She is also asking that her office be given 90 days to review any loans that are currently in foreclosure or that are moving toward foreclosure.
The suits came as Countrywide shareholders approved Wednesday the company’s takeover by Bank of America.
Write to Ruth Simon at [email protected]
-California, Illinois File Lawsuits Over Countrywide’s Practices, WSJ, 25 Jun 2008
Countrywide Stockholders Approve Transaction With Bank of America, MarketWatch, 25 Jun 2008
Text of the California suit, (PDF) WSJ, 25 Jun 2008
Illinois Plans to Sue Countrywide, CEO, WSJ, 25 Jun 2008
Bank of America’s Countrywide Tab Signed by Taxpayers, Bloomberg News, 25 Jun 2008
Countrywide Sued by California Over Mortgage Loans, Bloomberg News, 25 Jun 2008
2008 06 25 Countrywide Financial Faces Illinois Suit Over Mortgage Loans, Bloomberg News 25 Jun 2008
Senate Panel to Review Conrad’s Countrywide Home Loans, WSJ, 18 Jun 2008
‘Friends of Angelo’ Get Good Loans, WSJ, 07 Jun 2008