Countrywide Financial was sued for alleged deceptive mortgage lending by officials in its home state of California and in Illinois Wednesday, the same day its shareholders approved the company's takeover by Bank of America.
The civil lawsuits, which also name Chief Executive Angelo Mozilo as a defendant, accuse the largest U.S. mortgage lender of engaging in unfair trade practices that encouraged homeowners to take out risky loans, regardless of whether they could repay them.
The Calabasas, California-based lender became the company most closely associated with the U.S. housing boom -- in which mortgages with low teaser rates were seemingly handed out to anyone who sought one -- as well as the real estate market's subsequent collapse when shaky borrowers lost their homes to foreclosure when their mortgage rates rose.
"Countrywide exploited the American dream of homeownership and then sold its mortgages for huge profits on the secondary market," California Attorney General Jerry Brown said in a statement.
The company "was, in essence, a mass-production loan factory, producing ever-increasing streams of debt without regard for borrowers," Brown said.
"Today's lawsuit seeks relief for Californians who were ripped off by Countrywide's deceptive scheme." A separate lawsuit was filed by Illinois Attorney General Lisa Madigan.
The lawsuit, in Cook County Circuit Court in Illinois, seeks to rescind or reform Countrywide mortgages originated under alleged unfair and deceptive practices and for restitution for foreclosed homeowners, Madigan said.
Madigan also asked the court to put a 90-day stay on Countrywide loans in foreclosure in Illinois to allow her office time to review them.
A Countrywide representative was not immediately available to comment on the lawsuits.
The court cases come the same day Countrywide shareholders voted in a special meeting to approve the lender's $2.7 billion takeover by Bank of America , a deal spurred by the company's mortgage market woes. The deal, first announced in January, is expected to close by July 1.
The California lawsuit was filed in Los Angeles Superior Court. It also names company President David Sambol as a defendant.
Countrywide faces lawsuits on many fronts over its falling stock price and allegations it inflated earnings and overstated its ability to weather the housing slump.
It also has been accused of abusing bankruptcy or foreclosure processes. At least three lawsuits were filed by offices of the U.S. Trustee, part of the Department of Justice.
Mozilo also faces a Securities and Exchange Commission probe into his sales of Countrywide stock before the share price dropped sharply when the U.S. housing bubble burst.