August 13, 2008
West Virginia, on the heels of Connecticut, is the latest state to sue former subprime mortgage king Countrywide Financial. Connecticut sued Countrywide last week.
The lender was recently acquired by Bank of America.
West Virginia Attorney General Darrell McGraw filed suit against Countrywide, claiming the mortgage lender made loans to West Virginia consumers on terms that were "unaffordable and unconscionable." These loans exposed consumers to foreclosure and loss of their homes. Countrywide also used unfair and deceptive acts or practices to make loans and service loans, the complaint states.
For example, McGraw says Countrywide induced consumers to take out adjustable rate mortgages that offered a teaser rate for the first 2-5 years, but then reset at a much higher, unaffordable rate.
In other cases, Countrywide made loans that required no down payment, but, after 15 years of payments, the consumer owed a balloon payment of almost the original amount borrowed. In one case, he said the consumers could not refinance because the initial appraisal was inflated.
"Foreclosures in a neighborhood affect the value of all homes in that neighborhood," said McGraw. "Therefore, while the consumers facing foreclosure are directly affected by Countrywide's practices, all homeowners are indirectly affected."
Meanwhile, Countrywide faces a Federal Trade Commission probe into whether its loan-servicing activities violated federal law. Countrywide reported the probe in its quarterly report filed this week with the U.S. Securities and Exchange Commission. It said the FTC had issued demands requiring it to turn over company documents.
