The Illinois attorney general's office plans to sue Countrywide Financial and Chief Executive Angelo Mozilo on Wednesday, claiming the troubled mortgage lender engaged in deceptive trade practices.
The lawsuit, which will be filed in the Cook County Circuit Court, asks the court to rescind or reform all Countrywide loans that originated with the use of unfair and deceptive trade practices, said Robyn Ziegler, a spokeswoman for the attorney general's office.
The loans the lawsuit mentions include those lost to foreclosure as well as those that were refinanced, sold or are being serviced by Countrywide, Ziegler said.
Attorney General Lisa Madigan also is asking the court for 90 days to review any loans currently in foreclosure or moving toward foreclosure.
A copy of the complaint was not immediately available. A Wall Street Journal report said the complaint claims Countrywide loosened its underwriting standards, structured loans with risky features and engaged in marketing and sales techniques that encouraged employees and mortgage brokers to push loans regardless of whether the homeowners could repay them.
Countrywide officials did not return a telephone call seeking comment.
The lawsuit is the first known case of a state authority charging Countrywide, the largest U.S. mortgage lender, for actions related to the housing crisis. It also comes on the same day the company's shareholders are expected to vote on its sale to Bank of America . The acquisition is expected to close on July 1.
The company is facing many lawsuits because of its falling stock price, as well as suits accusing it of abusing the bankruptcy or foreclosure processes. At least three lawsuits were filed by offices of the U.S. Trustee, part of the Department of Justice.
Mozilo, meanwhile, is facing a U.S. Securities and Exchanges Commission probe into his sales of Countrywide stock before the price imploded. He also is facing allegations that politically connected "Friends of Angelo" got favorable loan terms from Countrywide.