U.S. & World

CHICAGO (AP) ― California's attorney general has filed a civil lawsuit against Countrywide Financial Corp., claiming the mortgage lender used misleading advertising and other unfair business practices to trick borrowers into taking on risky home loans they didn't fully understand.

The Los Angeles County Superior Court lawsuit comes on the same day Countrywide shareholders are scheduled to vote on the company's takeover by Bank of America Corp. The attorney general started gathering information last fall, when it started investigating the troubled company's business practices as foreclosures began to skyrocket nationwide.

The attorney general in Illinois plans a similar lawsuit, claiming in a civil lawsuit filed Wednesday that the nation's biggest mortgage lender engaged in "unfair and deceptive" practices to get homeowners to apply for risky mortgages far beyond their means.

The lawsuit against Countrywide Financial Corp. stems from information from documents subpoenaed by the state beginning last fall, as the number of foreclosures nationwide began to skyrocket.

"Countrywide's conduct has contributed to the high number of foreclosures in Illinois and caused significant harm to the public, the market, and scores of Illinois borrowers and homeowners," according to a draft of the lawsuit provided by Attorney General Lisa Madigan's office Tuesday evening.

A spokeswoman for the Calabasas, Calif.-based company declined to comment on the litigation.

Madigan spokeswoman Robyn Ziegler said the lawsuit would be filed Wednesday in Cook County Circuit Court. In the complaint, Madigan says that Countrywide offered unfair loans with risky features, used misleading sales techniques and encouraged employees and brokers through incentives to sell more high-risk loans.

"Unfair and deceptive advertising, marketing and sales practices were utilized to push mortgages, while hiding the real costs and risks to borrowers, including enticing borrowers with low teaser rates, low monthly payments and 'no closing cost' loans that failed to make clear and conspicuous," according to the lawsuit, which also names Countrywide Chairman and Chief Executive Angelo Mozilo as a defendant.

Among other things, Madigan wants Countrywide to pay restitution to all affected consumers who lost their homes or loans. She also asks for 90 days to review any loans that are in or near foreclosure to see if borrowers can pursue affordable options.

Countrywide, like many in the mortgage industry, has suffered under the weight of the subprime fallout as thousands of customers default on home loans.

Defaults and subsequent foreclosures have been most pronounced on adjustable-rate mortgages made to borrowers with past credit problems. The subprime loans typically require a lower monthly payment in the first two or three years before resetting to higher interest rates and much larger payments.

As the nation's largest mortgage lender and servicer, Countrywide has been under scrutiny by federal and state authorities. It also faces numerous other lawsuits related to its lending practices.

Countrywide agreed in January to sell itself to Bank of America Corp. for around $4 billion in stock. The deal is now valued at around $2.8 billion, reflecting a decline in Bank of America's stock price over the last six months.

The acquisition received clearance from the Federal Reserve earlier this month, and Countrywide shareholders are scheduled to vote on it Wednesday morning during a meeting at the lender's headquarters.

Assuming shareholders give their approval, Charlotte, N.C.-based Bank of America has said it could close the deal as early as July 1.
orney general's office is suing Countrywide, the nation's biggest mortgage lender, on claims that its practices contributed to the high foreclosure rates in the state.

The lawsuit against Countrywide Financial Corporation is being filed in Cook County on Wednesday.

The Illinois lawsuit comes after the state subpoenaed documents from Countrywide last fall when the number of foreclosures nationwide began to skyrocket.

Attorney General Lisa Madigan says the company promoted high-risk loans that contributed to the high number of foreclosures in Illinois. And authorities say they caused "significant harm to the public, the market, and scores of Illinois borrowers and homeowners."

A Countrywide spokeswoman declined to comment on the litigation, which seeks restitution for consumers.

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