OW Staff | 6/25/2008, 5 p.m.
Calling Countrywide Financial a "mass-production loan factory, producing ever-increasing streams of debt without regard for borrowers," Attorney General Jerry Brown filed a lawsuit in Los Angeles Superior Court Wednesday seeking to stop what it alleges are the company's deceptive practices and seeking monetary damages.
Brown said in the lawsuit that while traditionally and in the past mortgage lenders who made home loans to consumers, kept them in their own portfolio, Countrywide's chief executive and president engaged in deceptive advertising and unfair competition by pushing homeowners into risky loans for the purpose of reselling these transactions to third parties as securities or whole loans.
The suit also accuses Countrywide of luring in unsuspecting consumers with low "teaser" interest rates that fronted complex loans. The complaint added that Countrywide employees, including loan officers, underwriters and branch mangers are said to have misrepresented or glossed over the fact that borrowers with certain kinds of these loans would see huge increases in monthly payments after a point.
These business practices produced windfall profits for Countrywide, claimed Brown.
California's lawsuit is seeking from Countrywide a civil penalty of $2,500 for each violation of the state business code section 17500 and $2,500 for each violation of the Business and Professions Code section 17200.
It is reported that the Illinois attorney general is also expected to sue the Calabasas-based mortgage lender on the same grounds.
Once America's largest mortgage lender, today Countrywide has reported losses of $2.5 billion over the past three quarters.