California AG Jerry Brown Sues Countrywide

Wednesday, June 25, 2008 12:03 PM

California Attorney General Jerry Brown sued Countrywide Financial and two top officers on Wednesday to stop the mortgage loan company from allegedly perpetrating a scheme to "mass produce loans for sale on the secondary market."

Countrywide made one in six U.S. mortgage loans last year and is closely associated with the collapsed housing bubble.

Brown's office said the lawsuit, filed in Los Angeles Superior Court, also seeks unspecified restitution for homeowners who were allegedly conned into risky, costly loans they did not understand by brokers desperate to meet unrealistic production goals.

The suit further accuses Countrywide Chairman and Chief Executive Angelo Mozilo and David Sambol, president of Countrywide Home Loans Inc, of purposely easing underwriting standards for mortgages and home equity lines of credit in a play to double to company's share of the U.S. mortgage market.

The Calabasas, California-based lender stands accused of deceptive advertising and unfair competition for its alleged misleading practice of emphasizing low introductory loan rates while hiding risky or costly terms and of routinely soliciting buyers to refinance shortly after their initial loans closed.

After problems surfaced with a large number of its loans, Countrywide turned a blind eye to consumer complaints that they did not understand the terms of their loans or had been conned by brokers, the lawsuit said.

The filing comes the same day that Countrywide shareholders vote in a special meeting on whether to approve the lender's takeover by Bank of America Corp. The $2.7 billion merger is expected to be approved and to close by July 1.

Mozilo also faces a U.S. Securities and Exchange Commission probe into his sales of Countrywide stock before it declined steeply in the collapse of the U.S. housing bubble.

He also faces allegations that politically connected "Friends of Angelo" got favorable loan terms from Countrywide, as well as multiple shareholder lawsuits and actions accusing the lender of abusing the bankruptcy or foreclosure process.

http://moneynews.newsmax.com/financenew ... 07205.html