Source: Bloomberg
June 25 (Bloomberg) -- Countrywide Financial Corp., the mortgage lender that lost $2.5 billion amid rising defaults and foreclosures, was sued by California and Illinois for allegedly luring borrowers into risky loans they couldn't afford.
Countrywide and Chief Executive Officer Angelo Mozilo were named in suits, filed today, claiming the biggest U.S. home lender used deceptive practices such as low ``teaser'' rates to entice thousands of borrowers into adjustable-rate loans without adequately informing them that payments would balloon in later months.
Countrywide and Chief Executive Officer Angelo Mozilo were named in suits, filed today, claiming the biggest U.S. home lender used deceptive practices such as low ``teaser'' rates to entice thousands of borrowers into adjustable-rate loans without adequately informing them that payments would balloon in later months.
The two lawsuits were filed the same day Countrywide's shareholders approved Bank of America Corp.'s $3 billion takeover offer, clearing the way for the lender's bailout. Washington Governor Christine Gregoire said that state will fine Countrywide $1 million and revoke its license for allegedly discriminating against minority borrowers.
``It's going to be increasingly expensive for BofA because they are taking on all of these lawsuits,'' said David Olson, president of Wholesale Access Mortgage Research, in Columbia, Maryland. Countrywide was ``too aggressive and they should be punished.''
Countrywide fell 8 cents to $4.58 in New York Stock Exchange composite trading. The stock has slumped 88 percent in the past year. Bank of America fell 7 cents to $26.55.
Countrywide might face legal costs of $1 billion to $2 billion, CreditSights Inc. analyst David Hendler said today in a report.
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