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Florida Lender Sued for Worsening Mortgage Crisis

[Jul 16, 2008.]

 

The state of Florida launched a lawsuit against Countrywide Financial Corporation earlier today. The lawsuit accuses Countrywide of offering unethical and illegal loans, which the lender never intended borrowers to be able to pay off. According to the accusations, Countrywide is one of the principal parties at fault in the recent American subprime mortgage crisis.

Florida is not alone in this endeavor. Last week, authorities in Illinois and California proceeded to launch their own suits against Countrywide. This happened at the same time as shareholders sanctioned Bank of America's intentions to acquire Countrywide.

The Florida attorney general accuses Countrywide of misrepresenting its financial dealings in its 10-K documents. Countrywide, according to the state of Florida, offered money at subprime rates, expecting the borrowers to default. The company also gave subprime loans to customers who should have been able to get lower-interest-rate loans based on their credit histories.

The state of Florida plans to bring forth evidence that Countrywide put pressure on its own employees to underwrite loans without assessing whether or not the customer would be able to pay them off. Employees who did otherwise were kept in line with promises of punishment, including being forced to leave the company.

Many of the company's adjustable-rate-loans were set to drastically increase in interest rate after the end of the first ARM period. Allegedly, customers were not informed of this dire future for their mortgages. Instead, the customers were allegedly lied to. The state of Florida maintains that Countrywide representatives told customers that the interest rates on their adjustable-rate loans were fixed over the whole period of the loan.

Alternately, says the prosecution, customers were lied to about how soon the interest rates were set to increase, or how much more they would have to pay once the increase happened.

 

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