Florida Attorney General Files Lawsuit Against Countrywide

Florida Attorney General Bill McCollum has filed a lawsuit against Countrywide Financial for allegedly engaging in deceptive and unfair trade practices. The attorney general's lawsuit claims Countrywide put borrowers into mortgages they could not afford or loans with rates and penalties that were misleading. Chief Executive Angelo Mozilo was also named in the lawsuit.

‘It is unthinkable that a company would try to take advantage of someone's dream of homeownership,’ says McCollum. ‘Florida homeowners who are trying to protect their homes from foreclosures shouldn't have to worry about their mortgage brokers or lenders unfairly profiting at their expense.’

Similar to other mortgage lenders, Countrywide attempted to generate large numbers of mortgage loans for resale on the secondary mortgage market. In doing so, the company purportedly originated loans with little concern about whether the borrower could afford and maintain payments on these loans, the attorney general's office states.

The lawsuit also claims Countrywide hid potentially negative effects of teaser loans, including rising rates, prepayment penalties and negative amortization, which borrowers would inevitably face if they were making minimum payments or trying to refinance. Traditionally, lenders require borrowers to document income and assets, but investigators with the attorney general's office believe Countrywide offered reduced or no documentation loan programs to increase its loan sales.

Countrywide also allegedly paid greater compensation to brokers for loans with higher interest rates and prepayment penalties because it could sell those loans for higher prices on the secondary market.

Source: Office of Florida Attorney General Bill McCollum