Countrywide Financial
(CFC), widely blamed for helping foment the U.S. housing crisis through free-wheeling lending, was sued Wednesday for alleged deceptive mortgage practices by officials in its home state of California and in Illinois.
The civil lawsuits, which also name founder and Chief Executive Angelo Mozilo as a defendant, were brought the same day shareholders approved the company's takeover by Bank of America (BAC). The merger is set to close by July 1.
The Calabasas, Calif.-based lender became the company most closely associated with the U.S. housing boom and with the real estate market's subsequent collapse when shaky borrowers lost their homes to foreclosures when their mortgage rates rose.
The company's chief — Mozilo — has been fiercely criticized for his role in the bust. One of Corporate America's top-paid executives, he has been under fire from consumer activists, lawmakers and regulators for the company's lending practices and the way it treats borrowers struggling to keep up with mortgage payments.
The largest U.S. mortgage lender is accused in the lawsuits of unfair trade practices that encouraged homeowners to take out risky loans, regardless of whether they could repay them. California and Illinois officials said the company relaxed mortgage standards in an effort to rope in as many customers as possible. Countrywide "exploited the American dream of homeownership," then sold its mortgages for huge profits to third-party investors, California Attorney General Jerry Brown said.
The California case, which also names company President David Sambol as a defendant, was filed in Los Angeles Superior Court. The Illinois lawsuit was brought in Cook County Circuit Court, and seeks to rescind or reform Countrywide mortgages originated under alleged unfair and deceptive practices, as well as restitution for foreclosed homeowners.
Illinois Attorney General Lisa Madigan also asked the court to put a 90-day stay on Countrywide loans in foreclosure in her state to allow her office time to review them. Madigan said the foreclosure rate on Countrywide loans was more than double that of other lenders in 2006 and 2007 in Cook County, which includes Chicago.
In a statement, Countrywide said it was fully cooperating with the California and Illinois attorneys general, and was working with customers who are having trouble making mortgage payments.
Also on Wednesday, Washington Gov. Christine Gregoire planned a news conference to address "allegations of repeated discriminatory lending practices" by Countrywide, her office said.
