Countrywide Financial has been subpoenaed by the Illinois Attorney General as part of a widening probe regarding sketchy lending practices that have trapped scores of borrowers in high-cost, adjustable-rate mortgages.
Attorney general Lisa Madigan has subpoenaed documents from Countrywide in regard to its loan origination practices, and more specifically subprime and payment-option ARMs, a person briefed on the matter said.
The inquiry follows an earlier investigation of One Source Mortgage, a now defunct Chicago mortgage broker that relied heavily on Countrywide for its product offerings.
Madigan’s office sued One Source Mortgage on November 27 for misleading borrowers by promising low rates on mortgages while failing to explain that their interest rates and payments would rise substantially.
The attorney general’s office examined 69 borrower cases, and found that 26 of the first mortgages and 4 of the second liens were made by Countrywide, the company’s primary lender, and 20 others were tied to Fremont Investment and Loan, One Source’s second-largest lender.
The suit also contends that borrowers were rushed through the closing process, with typical closings taking less than 30 minutes, and some as little as 10 to 15 minutes.
“This company’s conduct is a prime example of unscrupulous mortgage brokers that has led to a foreclosure crisis for many Illinois homeowners,” Ms. Madigan said when she filed the suit against One Source.
One borrower-cum-victim asked Countrywide to drop the prepayment penalty on his loan after the interest rate spiked, but the lender would not comply.
A lawyer for the One Source president said his client denied all the claims and expects to be vindicated in court.
According to a recent analysis conducted by The Chicago Reporter, Chicago ranks first among United States metros in the number of subprime loans issued between 2004 and 2006.
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