Attorney General Steve Carter is the fifth state attorney general to take action against Countrywide for questionable practices this year.

Press Release

Indianapolis, Ind. -- Indiana Attorney General Steve Carter has filed a lawsuit against the country’s largest mortgage lender, Countrywide Home Loans, Inc., and its parent company, Countrywide Financial Corporation. Carter alleges that Countrywide engaged in deceptive and misleading practices that led to borrowers obtaining potentially risky and costly loans. The lawsuit has been filed in Steuben County Court.

“A pattern of misleading and questionable practices has emerged from our investigation into home loans,” said Carter. “These unfair lending practices may have harmed thousands of people and, in turn, negatively affected our communities and neighborhoods throughout the state.”

Carter’s investigation revealed that homeowners were misled when they were told one thing about their loans while signing contracts that indicated other terms. The most common misrepresentations uncovered to date have been on 1) pre-payment penalty terms, and 2) the time period in which interest rates would be recalculated (resetting ARMs – adjustable rate mortgages). The company also utilized no-documentation loans where a borrower’s income was misrepresented on the loan documents. In one case a person’s income was stated as $14,000 per month when in actuality the person’s income was approximately $3,000 per month.

Carter alleges in the lawsuit that Countrywide:

-- Provided financial incentive for employees and loan brokers acting as agents to sell loans with potentially risky features.
-- Made deceptive or misleading representations or omissions on loan terms and charges including, but not limited to, the interest rate of loans, the presence or mechanics of the adjustable rate feature of the loans and the interest rate or material costs of the loans.
-- Misled borrowers about the presence, significance and/or meaning of a prepayment penalty or the time period in which a pre payment penalty would apply.
--Inflated or fabricated a borrower’s income on a loan application allowing a borrower to be approved for loans he would have failed to qualify for otherwise.

Carter is requesting that the court order Countrywide to end the deceptive practices listed, void the prepayment penalties on Countrywide originated loans, and void any portion of the Countrywide originated loans resulting from deceptive acts.

“Before more people face the prospect of foreclosure or actually lose their homes, we need to determine whether individual loans may have been originated through methods that violated Indiana law,” added Carter.

The state is also seeking civil penalties of up to $15,500 per violation, as well as investigative costs and consumer restitution in an amount to be determined at trial.

The penalties are allowed under the Home Loan Practices Act, Indiana Code 24-9-8 which took effect July 1, 2005, and the Indiana Deceptive Consumer Sales Act, Indiana Code 24-5-0.5.

Carter is the fifth state attorney general to take action against Countrywide for questionable practices this year. The other states with pending actions include California, Connecticut, Florida, and Illinois. In addition, Washington and New Mexico have taken separate actions against the mortgage giant.

Indiana consumers whose home loan was originated with Countrywide should review their loan contract. If a consumer believes the terms of the loan are not what they believed them to be, he/she should complete a consumer complaint with the attorney general’s office at www.IndianaConsumer.com. More information and a frequently asked questions page is also available on the site at www.IndianaConsumer.com .

Source: Office of Attorney General Steve Carter