California and Illinois AGs Sue Countrywide Over Mortgage Loans, Borrowers Misled

Paul Kiesel

Attorney
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California Attorney General Jerry Brown filed a complaint today in Los Angeles state court claiming that Countrywide Chief Executive Officer Angelo Mozilo and a unit specializing in loans to consumers with poor credit used deceptive marketing tactics to entice thousands of borrowers into ARM loans without disclosing that their payments would balloon after 30 days. These are the same TILA violations that I've been blogging on for months now, and it is great to see Jerry Brown be one of the first two AGs to file suit against lenders like Countrywide, who were insatiable in their hunger to glut the mortgage market with misleading subprime loans.

According to Bloomberg News, Mr. Brown seeks restitution for borrowers, civil penalties of as much as $2,500 per violation and a court order halting the practices.

The other AG that has filed a lawsuit today is Illinois Attorney General Lisa Madigan, whom I discussed on Monday, in regards to how several states would be taking the appropriate steps to help mitigate the foreclosure crisis and bring lenders like Countrywide to task. Ms. Madigan contends that, "thousands of Illinois homeowners paid a steep price for Countrywide Financial's 'desire to dominate the marketplace'," (New York Times, 6/25/08). Lisa Madigan had subpoenaed Countrywide for documents last fall when the foreclosure crisis was in its early stages.

Ms. Madigan contends, as does Mr. Brown in California, that Countrywide promoted high-risk loans that contributed to the high number of foreclosures in Illinois and that Countrywide was more concerned with profits than keeping residents in their homes.

Both of these states' lawsuits come on news that Bank of America's acquisition of Countrywide has been approved by the latter's shareholders, earlier today.