Florida has joined Illinois and California as states suing subprime lender Countrywide Financial for deceptive and unfair trade practices.
The Florida lawsuit claims that Countrywide put borrowers into mortgages they couldn’t afford or loans with rates and penalties that were misleading.
As in the Illinois and California actions, Countrywide CEO Executive Angelo Mozilo was also named as a defendant.
Here you can read the complaint filed Broward County Circuit Court in Attorney General, Department of Legal Affairs, State of Florida v. Countywide Financial Corp., Countrywide Home Loans Inc., and Angelo Mozilo.
In filing the lawsuit, Florida Attorney General William “Bill” McCollum said that “It is unthinkable that a company would try to take advantage of someone’s dream of homeownership. 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. In the process, the company allegedly eased or ignored its own underwriting standards and encouraged borrowers to enter into “teaser” rates while concealing or misrepresenting that much larger payments would become due.”
According to Marc Taps of Legal Services of North Florida, “Our legal services programs throughout the state have seen a large number of clients who are now in default on mortgages written by Countrywide. It appears to us Countrywide did no due diligence and accepted applications which were patently fraudulent and reflected no ability on the part of the borrowers to make the required payments. We cannot help but conclude that the most financially unsophisticated segment of the population was targeted by the brokers who knew Countrywide would write these mortgages.”
The lawsuit also claims that Countrywide hid any 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.
The Florida Attorney General’s Office also asserts that “[Countrywide’s] deceptive marketing practices were supposedly designed to sell costly loans while hiding or misrepresenting the terms and dangers. Countrywide’s deceptive sales practices resulted in a large number of loans ending in default and foreclosure, with the company reporting earlier this year that more than 25 percent of its subprime loans were delinquent. The Attorney General’s Office received more than 150 complaints about Countrywide, prompting a subpoena in February and ultimately leading to today’s lawsuit.”
In a sign that the growing state legal assault on Countrywide is a bipartisan project, McCollum is the first Republican state attorney general to sue Countrywide.
As we’ve observed before, Countrywide’s expanding legal troubles do not bode well for Bank of America, which plans to acquire Countrywide.
Adding to the pressure on Bank of America to abandon the Countrywide deal, McCollum vowed that he would go after Bank of America’s assets to pay for the damages owed by Countrwide if the sale goes through.
Florida asks consumers who believe they have been victimized by Countrywide to call the Attorney General’s fraud hotline at 1-866-966-7226 or file a complaint online at: http://myfloridalegal.com.
The state of Washington is expected to file a lawsuit against Countrywide soon, accusing Countrywide of discriminating against minority borrowers. The state wants to fine the mortgage lender and revoke its license to conduct business in the state.