Archived: Attorneys General Go After Countrywide


Countrywide Financial, its chief executive and president engaged in deceptive advertising and unfair competition by pushing homeowners into risky loans for the purpose of reselling them on the securities market, Attorney General Jerry Brown said in a lawsuit filed Wednesday.

The once high-flying Calabasas-based mortgage lender — it was the nation’s biggest but has reported losses of about $2.5 billion over the past three quarters — is also expected to be sued on similar grounds by the Illinois attorney general.

It was not immediately clear what impact, if any, the lawsuits would have on Bank of America’s planned $4 million stock-swap deal to acquire Countrywide, whose shareholders approved the buyout yesterday morning.

Brown’s lawsuit was filed Wednesday morning in Los Angeles Superior Court, according to Gareth Lacy of the Attorney General’s Office.

“Countrywide exploited the American dream of homeownership and then sold its mortgages for huge profits on the secondary market,” Brown said.

“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.

“Today’s [Wednesday’s] lawsuit seeks relief for Californians who were ripped off by
Countrywide’s deceptive scheme.”

No one with Countrywide was available for immediate comment.

According to the lawsuit, Countrywide marketed complex loans with low “teaser” interest rates. Countrywide employees, including loan officers, underwriters, and branch managers misrepresented or glossed over the fact borrowers with certain kinds of loans would see big leaps in their monthly payments.

The lawsuit also seeks to hold Countywide chief executive Angelo Mozilo and president David Sambol responsible for damages, alleging they pushed to ease underwriting standards requiring that borrowers demonstrate their ability to pay off the loans.

Traditionally, mortgage lenders have made home loans to customers and kept them in their own portfolio, but Countywide sold its loans to third-parties in the form of securities or whole loans, according to the lawsuit.

The business model, Brown said, generated windfall profits for Countrywide.

-EGP News Service

Posted - Copyright © 2023 Eastern Group Publications, Inc.

Print This Post Print This Post

Leave A Reply

Comments are intended to further discussion on the article topic. EGPNews reserves the right to not publish, edit or remove comments that contain vulgarities, foul language, personal attacks, racists, sexist, homophobic or other offensive terminology or that contain solicitations, spam, or that threaten harm of any sort. EGPNews will not approve comments that call for or applaud the death, injury or illness of any person, regardless of their public status. Questions regarding this policy should be e-mailed to