Press Release:
Attorney General Bill McCollum today announced that his office has filed a lawsuit against Countrywide Financial, one of the nation’s largest mortgage companies, for allegedly engaging in deceptive and unfair trade practices. The Attorney General’s lawsuit claims Countrywide put borrowers into mortgages they couldn’t afford or loans with rates and penalties that were misleading. Chief Executive Angelo Mozilo was also named in the lawsuit.
“It is unthinkable that a company would try to take advantage of someone’s dream of homeownership,†said Attorney General McCollum. “Florida homeowners who are trying to protect their homes from foreclosures shouldn’t have to worry about their mortgage brokers or lenders unfairly profiting at their expense.â€
Similar to other mortgage lenders, Countrywide attempted to generate large numbers of mortgage loans for resale on the secondary mortgage market. In doing so, the company purportedly originated loans with little concern about whether the borrower could afford and maintain payments on these loans. In the process, the company allegedly eased or ignored its own underwriting standards and encouraged borrowers to enter into “teaser†rates while concealing or misrepresenting that much larger payments would become due.
“Our legal services programs throughout the state have seen a large number of clients who are now in default on mortgages written by Countrywide. It appears to us Countrywide did no due diligence and accepted applications which were patently fraudulent and reflected no ability on the part of the borrowers to make the required payments,†said Marc Taps with Legal Services of North Florida. “We cannot help but conclude that the most financially unsophisticated segment of the population was targeted by the brokers who knew Countrywide would write these mortgages.â€
The lawsuit also claims Countrywide hid any potentially negative effects of these “teaser†loans, including rising rates, prepayment penalties and negative amortization, which borrowers would inevitably face if they were making minimum payments or trying to refinance. Traditionally, lenders require borrowers to document income and assets, but investigators with the Attorney General’s Office believe Countrywide offered reduced or no documentation loan programs to increase its loan sales. Countrywide also allegedly paid greater compensation to brokers for loans with higher interest rates and prepayment penalties because it could sell those loans for higher prices on the secondary market.
The company’s deceptive marketing practices were supposedly designed to sell costly loans while hiding or misrepresenting the terms and dangers. Countrywide’s deceptive sales practices resulted in a large number of loans ending in default and foreclosure, with the company reporting earlier this year that more than 25 percent of its subprime loans were delinquent. The Attorney General’s Office received more than 150 complaints about Countrywide, prompting a subpoena in February and ultimately leading to today’s lawsuit.
Here is the pdf of the suit: countrywidecomplaint.pdf
