California Attorney General Edmund G. Brown Jr. stepped up his lawsuit against Countrywide Financial while providing more specific details into the mortgage lender’s alleged deceptive practices.
Brown’s amended lawsuit contains more evidence surrounding Countrywide’s “dangerous lending practices,” including individual cases where borrowers were deemed ultra-high risk but still granted an adjustable-rate home loan.
In one case, an 85-year old disabled veteran with a 509 credit score and a debt-to-income ratio of 60 percent was given a three-year ARM that defaulted just months later.
Another two cases highlight unsound underwriting decisions tied to the approval of pay option arms, which were eventually approved and defaulted upon within a year.
The amended suit notes that 19 percent of loans originated by Countrywide in 2005 were option arms, and that the loans carried a gross profit margin of about four percent, double those guaranteed by the FHA.
It also claims the mortgage brokers Countrywide took on as partners “misrepresented and obfuscated” the actual terms of these high-risk loans, playing down the impact of negative amortization and telling borrowers prepayment penalties could be waived if they refinance with Countrywide.
“As of April this year, 21.11% of the mortgages owned by Countrywide Home Loans were in some stage of delinquency or foreclosure, including 47.97% of originated non-prime loans, and 21.23% of Pay Option ARMs,” the suit says.
“In January and March, 2008, Countrywide recorded 3,175 notices of default in Alameda, Fresno, Riverside, and San Diego counties alone, representing an aggregate total of delinquent principal and interest of more than $917 million,” the suit said.
See the amended lawsuit in its entirety here if you like that sort of stuff.