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Sunday, August 24, 2008

Ind. Courts - AG files suit against Countrywide Mortgage, joining other states

A press release issued today by Attorney General Carter begins:

Indiana Attorney General Steve Carter has filed a lawsuit against the country’s largest mortgage lender, Countrywide Home Loans, Inc., and its parent company, Countrywide Financial Corporation. Carter alleges that Countrywide engaged in deceptive and misleading practices that led to borrowers obtaining potentially risky and costly loans. The lawsuit has been filed in Steuben County Court.

“A pattern of misleading and questionable practices has emerged from our investigation into home loans,” said Carter. “These unfair lending practices may have harmed thousands of people and, in turn, negatively affected our communities and neighborhoods throughout the state.”

Carter’s investigation revealed that homeowners were misled when they were told one thing about their loans while signing contracts that indicated other terms. The most common misrepresentations uncovered to date have been on 1) pre-payment penalty terms, and 2) the time period in which interest rates would be recalculated (resetting ARMs – adjustable rate mortgages). The company also utilized no-documentation loans where a borrower’s income was misrepresented on the loan documents. In one case a person’s income was stated as $14,000 per month when in actuality the person’s income was approximately $3,000 per month.

Carter alleges in the lawsuit that Countrywide:

  1. Provided financial incentive for employees and loan brokers acting as agents to sell loans with potentially risky features.
  2. Made deceptive or misleading representations or omissions on loan terms and charges including, but not limited to, the interest rate of loans, the presence or mechanics of the adjustable rate feature of the loans and the interest rate or material costs of the loans.
  3. Misled borrowers about the presence, significance and/or meaning of a prepayment penalty or the time period in which a pre payment penalty would apply.
  4. Inflated or fabricated a borrower’s income on a loan application allowing a borrower to be approved for loans he would have failed to qualify for otherwise.
For those who have Countrywide loans, the AG provides a useful Q&A about how the loans may be impacted.

Here is a brief Indianapolis Star story, posted late this afternoon.

Posted by Marcia Oddi on August 24, 2008 06:53 PM
Posted to Indiana Courts