Florida sues Countrywide Financial over mortgages

June 30 2008 - Florida sued mortgage lender Countrywide Financial Corp on Monday for predatory lending practices, alleging the company at the center of the U.S. mortgage crisis made subprime loans to people who could not repay them.

The Florida attorney general filed the lawsuit, which names Countrywide Chief Executive Angelo Mozilo as a defendant, in state court in Broward County, Florida.

Last Wednesday, officials in Illinois and the company’s home state of California also sued Countrywide. On the same day, shareholders approved the company’s takeover by Bank of America Corp.

A spokesman for Bank of America, which is expected to complete its planned acquisition of Countrywide in July, declined to comment on the Florida lawsuit.

The state alleged the company gave subprime loans to borrowers who could not repay them, loaned money at higher subprime rates to people who qualified for prime rate loans and engaged in other deceptive marketing and unfair trade practices, contrary to claims in its 10-K filings.

Underscoring the aggressiveness of its lending practices — aimed at maximizing the company’s profits regardless of credit risk — the complaint said Countrywide’s own underwriters were “threatened with termination for attempting to verify a borrower’s ability to pay, or otherwise impeding loan approval.”

It added managers were encouraged to approve subprime loan applications initially denied by underwriters who suspected fraud.

Florida sues Countrywide over mortgages
by Jim Loney | Reuters