Illinois To Sue Countrywide Over "Unfair And Deceptive" Mortgages

CHICAGO — The nation's biggest mortgage lender engaged in "unfair and deceptive" practices to get homeowners to apply for risky mortgages far beyond their means, according to a civil lawsuit Illinois' attorney general planned to file Wednesday.

The lawsuit against Countrywide Financial Corp. _ planned for the same day shareholders were scheduled to vote on the company's takeover by Bank of America Corp. _ stems from information from documents subpoenaed by the state beginning last fall, as the number of foreclosures nationwide began to skyrocket.

"Countrywide's conduct has contributed to the high number of foreclosures in Illinois and caused significant harm to the public, the market, and scores of Illinois borrowers and homeowners," according to a draft of the lawsuit provided by Attorney General Lisa Madigan's office Tuesday evening.

A spokeswoman for the Calabasas, Calif.-based company declined to comment on the litigation.

Madigan spokeswoman Robyn Ziegler said the lawsuit would be filed Wednesday in Cook County Circuit Court. In the complaint, Madigan says that Countrywide offered unfair loans with risky features, used misleading sales techniques and encouraged employees and brokers through incentives to sell more high-risk loans.

"Unfair and deceptive advertising, marketing and sales practices were utilized to push mortgages, while hiding the real costs and risks to borrowers, including enticing borrowers with low teaser rates, low monthly payments and 'no closing cost' loans that failed to make clear and conspicuous," according to the lawsuit, which also names Countrywide Chairman and Chief Executive Angelo Mozilo as a defendant.

Among other things, Madigan wants Countrywide to pay restitution to all affected consumers who lost their homes or loans. She also asks for 90 days to review any loans that are in or near foreclosure to see if borrowers can pursue affordable options.

Countrywide, like many in the mortgage industry, has suffered under the weight of the subprime fallout as thousands of customers default on home loans.

Defaults and subsequent foreclosures have been most pronounced on adjustable-rate mortgages made to borrowers with past credit problems. The subprime loans typically require a lower monthly payment in the first two or three years before resetting to higher interest rates and much larger payments.

As the nation's largest mortgage lender and servicer, Countrywide has been under scrutiny by federal and state authorities. It also faces numerous other lawsuits related to its lending practices.

Countrywide agreed in January to sell itself to Bank of America Corp. for around $4 billion in stock. The deal is now valued at around $2.8 billion, reflecting a decline in Bank of America's stock price over the last six months.

The acquisition received clearance from the Federal Reserve earlier this month, and Countrywide shareholders are scheduled to vote on it Wednesday morning during a meeting at the lender's headquarters.

Assuming shareholders give their approval, Charlotte, N.C.-based Bank of America has said it could close the deal as early as July 1.

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AP Business Writer Alex Veiga in Los Angeles contributed to this report.

___

On the Net:

http://www.countrywide.com

http://www.illinoisattorneygeneral.gov

(This version CORRECTS in 6th graf that CFO David Sambol not named in lawsuit.)

Comments

[ChiGuy]

We in IL can only hope that IL-AG Lisa Madigan gets into national politics.
She'd be a great replacement for 0 once he becomes POTUS.

[MilwaukeeDan]

This lawsuit has absolutely nothing to do with Ms. Madigan wanting to replace Governor Blagojevich(D) with herself, a second or third generation well connected Chicago politico. It will also give her a chance to try her court skills, something she has not used since her law school days. Yes, she became an attorney general without trying a case in court, it helps to be well connected in Chicago. Don't get me wrong, Countrywide is run by gangsters and I'm not defending them, but why not put them on trial in California first? That's where most of the damage was done.

[ChiGuy]

All signs point to William Daley, former Sec'y. of Commerce and Richie's brother, being the Dem candidate to replace Blago. Not Madigan, although her name has been mentioned before.

Personally, I'd like to see her replace 0bama.

Interesting tidbit on her:

"She was also cited by the New York Times to be among the seventeen most likely women to become the first female President of the United States of America should Hillary Clinton fail in achieving the office."

http://en.wikipedia.org/wiki/Lisa_Madigan

[dagnome27]

Angelo Mozilo needs to be held accountable (financially) for the chaos his company wreaked on the American economy, not made wealthy by selling his interest to Bank of America.
Indict, convict, imprison.

[outnow]

The Attorney General of California, former Governor Jerry Brown, has joined California in the lawsuit. The Countrywide deal will probably not go down.

When a lender laughingly calls the extension of credit a "liar's loan, or "NINC" no income documentation, and no credit, then a violation of the consumer laws is evident.

Many of the loan brokers were independents to establish a plausible fall guy mechanism; "We didn't know that the borrowers had no credit and no documentation of income. The guy had two arms and a leg plus a pulse, so we lend him several hundred thousand on an inflated appraisal and the bundled the loan with others and sold then to a "trust" that dumped the risk of bad paper down the line. We even securitized the fraudulent asset and had monoline insurance."

Monzila has some 'splaning to do and Rep. Issa wouldn't be there to help him as he did in the hearings. Spreading the American dream to help out minorities buy into equity doesn't explain the complex terms and the "easy credit." This is a big Ponzi scheme.

[NABNYC]

Outnow: you are exactly right. Loan brokers used to be bank employees, but they now are mostly independent, working on their own even though they mostly place loans with only a few lenders. Since the broker represents the borrower, and is not the agent for the lender, the lender is not responsible for any representations made by the broker to the borrower.

The problem with this and similar lawsuits is the same: no plausible remedy. Let's say these borrowers show that the 5-year interest-only loan they took out was ill advised. Let's say they borrowed 100% of the purchase price, $500,000. Now they want to un-do the transaction, un-do the loan. That means they have to give Countrywide back the $500,000. But the borrower already paid that money to the home seller. So if the borrower wants to get rid of the Countrywide loan, they need to re-finance, but the property is now 20% down, only worth $400,000, so that's the most they could borrow under old standards, and today would probably only be able to borrow $360,000 (10% down).

You could sue the mortgage loan brokers but they're mostly out of business. The reason the government is supposed to stop this widespread financial disaster as soon as they see it is because if they wait too long, there is no remedy. Like Enron: by the time anyone stepped in, the money was long-gone and all the victims got nothing.

[zizyphus]

Anyone with two eyes could tell that the CEO of Countrywide is a gangster. Also, I feel sure that Bank of America is organized crime. At least, they try to scam you for every nickel. Listen to my story:

I usually would pay off my bill on time each month. One month I had a large purchase, and took three months to pay it off. I was eagerly awaiting that bill showing a zero balance. Instead, it showed a fee of $1.56. I called them, and the voice on the other end explained that I was being charged because I had paid off my bill on time each month, but then having taken three months to pay off, I was now being charged this small fee. Then she said that because I was unaware of it, she would remove it from my bill, "this time".

Okay. Mollified, I waited for the next statement. When I saw it, my eyes bulged out of my head. There was the $1.56 fee, still on it, and now they had tacked a $29.00 late fee onto that! I called again and let them have it, and they removed both charges. I won't use them again.

[veracity]

Exactly! __"Anyone with two eyes could tell that the CEO of Countrywide is a gangster. Also, I feel sure that Bank of America is organized crime. At least, they try to scam you for every nickel. Listen to my story."__
Due to Bank of America's (BOA) excellent customer service (at most local branches), I was suckered in to a feeling of confidence, so I consolidated my credit cards on one BOA acct, paying $300 fee (3%) to lock in a "zero" interest rate for a year. (That fee made it actually a 3% rate, of course, paid up front.) One month (due to stress of terminating a lease I had) I was a week late with a monthly loan payment - and BOA kicked my credit interest to 29.27%, barely shy of 30% loan-sharking!
Confident of their good customer service, I called, them, explained that I had pre-paid the guaranteed low rate for a year, that I had let my property problems get the better of me, but that I had only missed my payment deadline by a day or three. TOO BAD!
"TERMS AND CONDITIONS" the BOA specialist told me on the other end. i.e - "WE GOT YOU NOW!"
BOA is a classic BAIT & SWITCH operation, they IMPLY you are getting something but want to stick you with something altogether different. I was able to pay that account off, but not before the #*$%!s had put some nice black marks on my credit.

[sher2x4]

What the hell is the problem here.
I'll tell you.
We expect corperate America to play fair.
That morality, justice, fairness
concern for our fellow man, etc.
are at play here.

When I wake up every morning
I remind myself
only crimminals wear a suit and tie.

[ROBOT8]

DHS is about as capability of monitoring civil liberties as the Gestapo was willing and able to guarantee the rights of German citizens in the 1930s. Congress should not simply demand proof that this surveillance program will not affect the privacy of American citizens but they should deny funding for the program in toto. Satellite collect data indiscriminately, which means it will be up to the people examining these data to destroy it if data doesn't address national security issues. Since no one has ever defined what national security actually means--it's something of a moving target--virtually any data collected can and will be stored, and, eventually used to negatively impact American civil liberties. I confess, having absolutely no faith in the Bush administration to behave in a manner consistent with the Constitution.
ARE THEY EAVESDROPPING ON THE MORTGAGE COMPANIES?

[dadw5boys]

Check the Property Appraisals Country Wide did you will find they are constantly over valued too!!!!!!!!!!!

[thegreatgiginthesky]

My wife used to work for Countrywide. She was appaled at the fact that they were handing out loans to people with credit scores as low as 480.

[GoCards1978]

They made their money up front with closing costs, etc. That was the sum total of their business model. They never intended to service those mortgages when they could bundle then sell them to other investors. The originator(s) of this Ponzi scheme need to be impoverished after all is said and done.