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Lawsuits Pile Up Against Countrywide

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Countrywide Financial Corp. is facing its seventh lawsuit in three months. The latest action alleges overcharging, mortgage fraud and poor underwriting.

Connecticut Attorney General Richard Blumenthal announced today that his office has sued the Calabasas, Calif.-based company. The lawsuit was filed in Superior Court, Judicial District of Hartford, over alleged violations of Connecticut’s consumer protection and banking laws.

Blumenthal alleges the Bank of America Corp. subsidiary forced borrowers into deceptive, unaffordable loans. Among the misleading loans were interest-only payments that shot up after resetting.

The lender allegedly falsified borrowers’ incomes to qualify them for loans they couldn’t pay back. After being denied at one branch, one home-equity borrower was allegedly sent to another branch and approved.

Blumenthal added that borrowers were promised, then denied, the ability to refinance. They were also allegedly promised loan terms that were better than what wound up on the closing documents.

He also claims Countrywide charged defaulted borrowers unjustified and excessive legal fees in order to reinstate their loans. When repayment and modification plans were offered, they were “unsustainable, unaffordable or unsuitable.”

“Countrywide conned customers into loans that were clearly unaffordable and unsustainable,” Blumenthal said in the statement. “When consumers defaulted, the company bullied them into workouts doomed to fail. Countrywide crammed unconscionable legal fees into renegotiated loans, digging consumers deeper into debt.”

In addition to civil penalties of up to $100,000 per violation of state banking laws and up to $5,000 per violation of state consumer protection laws, the state is seeking for Countrywide to provide restitution for the borrowers and give back ill-gotten gains. The lawsuit also calls for a rescission, reformation or modification of mortgages where state laws were broken.

In April 2007, Countrywide settled for more than $500,000 charges by Connecticut that its wholesale unit imposed prepaid finance charges in excess of the 5 percent or $2,000 state maximum on 111 loans.

Since May of this year, Countrywide has been sued by various pension and retirement fund investors; the states of California, Florida and Illinois; California borrowers; and the city of San Diego. In addition, the governor of Washington also announced actions against the company.

State of Connecticut and Howard F. Pitkin, Commissioner of Banking of the State of Connecticut v. Countrywide Financial Corporation, Countrywide Home Loans Inc., and Countrywide Home Loans Servicing LP
July 28, 2008 (Connecticut Superior Court, Judicial District of Hartford)

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