Florida Sues Countrywide over Mortgages
Florida sued mortgage lender Countrywide Financial Monday for predatory lending practices, alleging the company at the center of the U.S. mortgage crisis made subprime loans to people who could not repay them.
The Florida attorney general filed the lawsuit, which names Countrywide Chief Executive Angelo Mozilo as a defendant, in state court in Broward County, Florida.
Last Wednesday, officials in Illinois and the company's home state of California also sued Countrywide. On the same day, shareholders approved the company's takeover by Bank of America .
A spokesman for Bank of America, which is expected to complete its planned acquisition of Countrywide in July, declined to comment on the Florida lawsuit.
The state alleged the company gave subprime loans to borrowers who could not repay them, loaned money at higher subprime rates to people who qualified for prime rate loans and
engaged in other deceptive marketing and unfair trade practices, contrary to claims in its 10-K filings.
Underscoring the aggressiveness of its lending practices -- aimed at maximizing the company's profits regardless of credit risk -- the complaint said Countrywide's own underwriters were "threatened with termination for attempting to verify a borrower's ability to pay, or otherwise impeding loan approval."
It added managers were encouraged to approve subprime loan applications initially denied by underwriters who suspected fraud.
"Defendants did not adhere to its underwriting standards, allowed the origination of 'no documentation or reduced documentation' subprime loans and failed to ensure that borrowers had sufficient capacity to repay such mortgage loans," the complaint said.
Countrywide made subprime adjustable rate loans "when they knew or should have known that the borrowers would not be able to repay the loan once the initial ARM period expired," the state claimed.
The complaint also alleged Countrywide told customers the interest rates were fixed when they were not, misrepresented to borrowers the amount of time the initial fixed interest rates would be in effect and misrepresented how much payments would increase when the initial rate expired.
"It is unthinkable that a company would try to take advantage of someone's dream of homeownership," Florida Attorney General Bill McCollum said in a statement.
"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."
Florida and California are among the leaders in mortgage defaults.