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Illinois, California AGs file suit against Countrywide



Illinois Attorney General has now filed a suit against Countrywide ("mortgage giant" is just the nickname) and related parties. From the lengthy news release:

Chicago - Attorney General Lisa Madigan today filed a lawsuit in Cook County Circuit Court against Countrywide, the nation's largest mortgage lender and servicer. The complaint alleges that Countrywide Home Loans, Inc., and its parent company, Countrywide Financial Corporation, engaged in unfair and deceptive conduct on a large scale in creating, originating, marketing and servicing unnecessarily risky and costly mortgage loans for Illinois homeowners.

The complaint also names as defendants Countrywide's subprime lending unit, Full Spectrum Lending; the company's servicing arm, Countrywide Home Loans Servicing LP; and Angelo Mozilo, the co-founder and former CEO of Countrywide Financial whose name has become synonymous with the excesses of the subprime mortgage industry. The lawsuit is the result of a nine-month probe by Madigan's office into the lending practices of Countrywide.

The complaint is available here.

With the timing of the filing, Madigan has certainly magnified the PR and political impact of the suit. Countrywide's shareholders approved the company's purchase by Bank of America today, and there's a highly charged debate in the U.S. Senate about housing finance legislation, H.R. 3221, which received unflattering attention in a Washington Post story today, "Vital Part of Housing Bill Is Brainchild of Banks."

Of course, California AG Jerry Brown has also sued Countrywide et al. From his news release.

Brown alleges that Countrywide Financial used deceptive tactics to push homeowners into complicated, risky, and expensive loans so that the company could sell as many loans as possible to third-party investors. According to the lawsuit, the company marketed complex and difficult to understand loans with very low initial or "teaser" interest rates or payments. 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 complaint, filed in Superior Court, County of Los Angeles, Northwest District, is here.

And Brown manages to find an environmental angle: The phrase "high pressure sales environment" appears six times in the complaint.

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Isaac Gorodetski
Project Manager,
Center for Legal Policy at the
Manhattan Institute
igorodetski@manhattan-institute.org

Katherine Lazarski
Press Officer,
Manhattan Institute
klazarski@manhattan-institute.org

 

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.