State expands Countrywide suit
Countrywide Financial Corp., which faltered earlier this year under the weight of soured mortgages, made a practice of doling out bonuses to employees who sold risky loans, California officials alleged in an amended lawsuit Thursday.
The allegations expand charges made in a suit filed by Atty. Gen. Jerry Brown against Countrywide and several of its top executives in June. In that suit, Brown alleged that the Calabasas-based mortgage lender routinely ignored or loosened its lending standards in an effort to increase its share of the national home-loan market.
The amended suit includes details that were withheld from the original litigation for confidentiality reasons.
The complaint alleges that Countywide loan officers regularly disregarded warnings from the firm’s computerized underwriting system, which was designed to red-flag potential borrowers who failed to meet Countrywide’s lending guidelines.
In one example cited in the suit, Countrywide offered a mortgage in February 2005 to an 85-year-old disabled veteran, even though the applicant had a low credit score and too much debt to qualify for the loan. The loan was in default within six months.
Loan officers received higher commissions for putting borrowers in the riskiest loans, such as adjustable-rate mortgages with very low initial “teaser” rates that would balloon over time, the suit alleges.
Amid fears that it was sliding into insolvency, Countrywide agreed in January to be acquired by Charlotte, N.C.-based Bank of America. A spokesman for Bank of America couldn’t be reached for comment late Thursday on the state’s amended lawsuit.
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