Highlights from California's complaint against Countrywide

California and Illinois both filed suit against Countrywide Financial Corp. today, alleging deceptive business practices in the mortgage giant’s lending operations in the last few years.

These cases are likely to be the first of a flood of state suits against Countrywide (soon to be a unit of Bank of America Corp.) for its role in the mortgage boom and bust. But the end result of the legal pile-on is far from clear -- in particular, whether the states’ cases will mean even a penny of help for borrowers who were, in fact, victims.

And how to separate the victims from the greedy borrowers who knew all too well that they were taking out loans they couldn’t afford?

In any case, the California and Illinois allegations will resonate with many people who did business with Countrywide (and with plenty of other lenders in the boom years). They’ll also resonate with people who were responsible borrowers and who were aggravated by Countrywide’s nonstop mail solicitations begging them to borrow more money. Yes, this is America, and you're allowed to market your business. But it's one thing to hawk, say, cable TV services; it's another to help load a family with so much debt that it ruins their lives.

Here are some of the highlights of the California complaint against Countrywide, Chief Executive Angelo Mozilo and President David Sambol (none of whom is commenting). Note the generic nature of these allegations. This case could really use some meat on these bones:

-- "Defendants viewed borrowers as nothing more than the means for producing more loans, originating loans with little or no regard to borrowers’ long-term ability to afford them and to sustain homeownership. This scheme was created and maintained with the knowledge, approval and ratification of defendants Mozilo and Sambol.

-- "To further the deceptive scheme, defendants created a high-pressure sales environment that propelled its branch managers and loan officers to meet high production goals and close as many loans as they could without regard to borrower ability to repay.

-- "Countrywide received numerous complaints from borrowers claiming that they did not understand their loan terms. Despite these complaints, defendants turned a blind eye to the ongoing deceptive practices engaged in by Countrywide’s loan officers and loan broker ‘business partners,’ as well as to the hardships created for borrowers by its loose underwriting practices.

-- In the case of home-equity lines of credit, or HELOCs, "Countrywide typically urged borrowers to draw down the full line of credit when HELOCs initially funded. This allowed Countrywide to earn as much interest as possible on the HELOCs it kept in its portfolio. For the borrower, however, drawing down the full line of credit at funding meant that there effectively was no ‘equity line’ available during the draw period, as the borrower would be making interest-only payments for five years.

-- "Underwriters were under intense pressure to process and fund as many loans as possible. They were expected to process 60 to 70 loans per day, making careful consideration of borrowers’ financial circumstances and the suitability of the loan product for them nearly impossible.

-- "Because of the intense pressure to produce loans, underwriters increasingly had to justify why they were not approving a loan or granting an exception for unmet underwriting criteria to their supervisors, as well as to dissatisfied loan officers and branch managers who earned commissions based on loan volumes.

-- "Countrywide’s high-pressure sales environment and compensation system encouraged serial refinancing of Countrywide loans. The retail compensation systems created incentives for loan officers to churn the loans of borrowers to whom they had previously sold loans, without regard to a borrower’s ability to repay, and with the consequence of draining equity from borrowers’ homes."

Photo: Countrywide CEO Angelo Mozilo. Credit: Ric Francis / Associated Press

Comments

[Tish]

How do I go about finding a lawyer here in Phoenix to pursue a case against CW. Responding to an offer to refince my exhisting loan with CW; I asked if it would be to my benefit to refinance, and asked if it would reduce my monthly payment. I was strongly advised that it would be the best thing for me to do. Where my payments were managable, I am now borrowing from Peter to pay Paul.

I contacted CW when I realized the product sold to me was not what I expected. My husband was laid off and I was advised by the retention department to stop making payments, than they might be able to help otherwise there was nothing that could be done since my payments are current. Other options given me, were to walk away from my home or to take a short sale. Neither are options. At my age, I can't start over. I was deceived into refinancing. I have talked to everyone there to no avail, at one point I was laughed at, and humiliated. Does anyone have advice for me?

[DF Writer]

I suggest you look at the choices you made when you decided to be a homeowner. Did you but above your means right from the beginning.? Is it the lenders fault that you can not now make payments because your husband lost his job? I think it is rediculous to sue a compnay because they advertise and sell, and you as a consumer do not do your homework and buy something you can not afford. When I bought my house, we made sure we could affrod it on one salary. I bought a smaller house than I wanted, with a further commute than I wanted- but I knew it was MY responsibility to pay the mortgage. I shopped around for the best deal, and talked to people who understood mortgaes, so I understood what I was getting in to. I think it is disgusting that people are blaming Angelo Mozilo and Countrywide for their own poor choices or bad luck. How about you sue Geaorge Bush and Congress for getting our country in this fanancial mess?

[Janie L.]

If they really want to get this case against the Slimy Mazilo going, get previous employees to testify. CW intentionally hired people without
experience. The less you know the less you can inform people about
what they are getting in a loan. Thats the way they want it. If the general public knew what they paid their loan officers (except for managers), you would be absolutely amazed and sickened. The top people get raises the loan officers got nothing, or next to nothing. The customer was never an issue never will be......