Calif. attorney general sues Countrywide

June 25, 2008 6:01:26 PM PDT
California's attorney general slams the nation's largest mortgage lender with a lawsuit over risky loans that cost people their homes.

The lawsuit accuses Countrywide Financial of misleading and unfair business practices. California is demanding that Countrywide pay restitution to borrowers who lost their homes or loans and tens of thousands of people were affected.

California's lawsuit, and another like it in Illinois, cut to the core of the financial crisis in the Bay Area and elsewhere. It blames Countrywide for coursing people into loans destined for default.

"It was a very corrupt scheme," said California Attorney General Jerry Brown.

An angry Brown announced California is suing Countrywide Financial Corporation on the grounds the nation's largest lender duped thousands of borrowers into taking risky loans they didn't understand and couldn't afford.

"We're accusing Countrywide of creating complex mortgage instruments, with pages of documentation, tied to various lending rates that were totally obscure," said Attorney General Brown.

According to the lawsuit, Countrywide obscured the potential risks, misled consumers about payment terms, prepayment penalties and told borrowers they'd be able to refinance before the low teaser interest rate and payments adjusted dramatically upward.

"You have consumers who in many cases are relying on the expertise of mortgage brokers to understand very complicated loan documents and very complicated loan terms and Attorney General's office is saying even in that very difficult environment for consumers, Countrywide made it more difficult and unfair," said Kevin Stein, California Reinvestment Coalition.

Countrywide Chairman and CEO Angelo Mozilo is personally named in the California lawsuit, which states Mozilo actively pushed for an easing of underwriting and loan documentation standards.

"I do take full responsibility for anything that happens at Countrywide," said Angelo Mizilo, the Countrywide CEO.

In the meantime, thousands of Mozilo's clients have suffered greatly, like Oakland's Gertrude Guillory, who says her 2006 loan from Countrywide contained a pre-payment penalty, even though she was told repeatedly that it did not.

"When I went in there, I went in with my eyes totally open, with all my questions. And the main one was about the prepayment penalty because I know what that can do to you. After I was told there wasn't any, we decided to proceed and go ahead with the loan," said Gertrude Guillory, Countrywide Borrower.

Countrywide did not respond to ABC7's repeated requests for comment. ABC7 was able to get in contact with Bank of America who is set to acquire Countrywide next week. Bank of America responded with, "No comment."


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