Countrywide Sued by State of Oregon

July 14, 2010 No Comments »

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The ghost of Countrywide Financial lives on…

The former home lending giant has been sued by the state of Oregon over pension fund losses tied to risky mortgage-backed securities.

Oregon Treasurer Ted Wheeler and Attorney General John Kroger announced today that The Oregon Public Employee Retirement Fund was “induced to invest” $200 million in home loans originated by Countrywide, and lost $29 million as a result of misrepresentations by the lender and its financial underwriters.

The suit, filed in federal court in California, says Countrywide provided documents to investors that “falsely claimed” all mortgages held in the investment fund met acceptable underwriting standards, such as credit score requirements and a borrower’s ability to repay.

It claims Countrywide was able to originate loans on such a massive scale because they could easily be packaged and sold on the secondary market, providing funding for new batches of toxic loans.

Per the suit, Countrywide was the largest mortgage lender from 2005 through 2007, originating more than $850 billion in home loans between 2005 and 2006 alone.

Oh, and originate-to-distribute loans apparently default more than loans held on banks’ books.

“Oregon is currently No. 3 nationwide in foreclosures,” said Attorney General Kroger, in a press release. “This lawsuit will help hold the responsible companies accountable.”

The Iowa Public Employees’ Retirement System is the lead plaintiff in the case, which names a number of underwriters including Banc of America Securities, Bear Stearns, Citigroup, Deutsche Bank, Goldman Sachs, JP Morgan, and others.

Oregon is the eighth state (?) to take action against Countrywide, following similar action by California, Colorado, Connecticut, Florida, Illinois, Indiana, and West Virginia.

Countrywide was acquired by Bank of America back in 2008 after taking on massive losses tied to the ongoing mortgage crisis.

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