The California attorney general’s office said Wednesday that it has filed a civil lawsuit against Countrywide Financial Corp. and its chief executive, Angelo Mozilo, over the company’s allegedly deceptive mortgage lending practices.
The lawsuit, filed in Los Angeles County Superior Court, alleges that the Calabasas-based company led large numbers of homeowners into foreclosure by intentionally pushing risky, expensive loans on borrowers who often did not have the income necessary to repay the loans.
“Countrywide exploited the American dream of homeownership and then sold its mortgages for huge profits on the secondary market,” said California Attorney General Edmund Brown in a statement. “The company sold ever-increasing numbers of complex and risky home loans, as quickly as possible. Countrywide was, in essence, a mass-production loan factory, producing ever-increasing streams of debt without regard for borrowers.”
The lawsuit, which also names President David Sambol as a defendant, claims Countrywide executives relaxed the company’s underwriting standards in order to “rope in as many customers as possible.” The lawsuit comes on the same day that Countrywide shareholders approved the purchase of the company by Bank of America Corp.
On Tuesday, the Illinois attorney general’s office announced plans to file a similar lawsuit against the company.
Countrywide released a statement Wednesday saying, “We are not going to comment on the specifics of the lawsuit, except to say that we are fully cooperating with the offices of the California and Illinois attorneys general. Our mission remains to assist our customers. We are particularly focused on working with our customers who are having difficulty making their mortgage payments, or who foresee difficulty with future rate resets.”
Officials in both states said they started investigating the company last fall after foreclosure rates surged across the country.
In a draft of the Illinois lawsuit, expected to be filed Wednesday, the state said Countrywide “has contributed to the high number of foreclosures in Illinois and caused significant harm to the public, the market and scores of Illinois borrowers and homeowners.”
Separately, late Wednesday, Washington Gov. Chris Gregoire said the state is seeking to revoke the lender’s business license and impose a $1 million fine.
Separately, more than 69 percent of outstanding Countrywide shares were voted Wednesday in favor of the lender’s acquisition by Bank of America. The deal, a stock swap, is expected to close July 1. It was once valued at $4.1 billion but is down to $2.8 billion as Bank of America’s share price has slid since the deal was announced.