What’s the downside to buying a struggling mortgage lender on the cheap? Well, among other things, cleaning up their dirty past.
Bank of America just pledged $8.4 billion in aid to former Countrywide borrowers, and now it looks as if Chase may have to do the same.
San Diego City Attorney Michael Aguirre filed a civil compliant Friday against Washington Mutual, alleging the mortgage lender engaged in “unfair or fraudulent predatory real estate lending practices.”
The suit claims WaMu’s “predatory” lending practices caused scores of California residents to lose or be in jeopardy of losing their homes as a result of foreclosure.
Among the charges, it alleges WaMu made loans without consideration or verification of a borrower’s ability to repay the loan, colluded with appraisers to inflate home values, induced borrowers to serially refinance, and committed fraud to conceal the nature of a loan obligation.
The lawsuit is seeking to enjoin WaMu from initiating or advancing foreclosures on any owner-occupied residential mortgages involving subprime ARMs or fixed-rate mortgages, and also option arms, until workout or relocation measures have been taken.
“Countrywide has seen the light and now it is WaMu’s turn to demonstrate that they are a good corporate citizen,” City Attorney Aguirre said in a statement.
Back in late July, the city of San Diego filed a lawsuit against defunct mortgage lender Countrywide Financial for similar offenses.
Home loans originated in California accounted for half of WaMu’s mortgage portfolio by the end of 2007, according to a company filing cited in the lawsuit.