The drumbeat of trouble goes on for Countrywide Home Loans - the lender alleged to be at the center of many high-leverage, poorly-scrutinized, now-defaulting home mortgages.
Wednesday, June 25th, Lisa Madigan, the Attorney General of Illinois, filed suit against the company. The Attorney General of California filed their state's own suit later the same day.
The suit also names Full Spectrum Lending, Countrywide's sub-prime lending division, as well as the firm's servicing unit, and their co-founder Angelo Mozilo.
While Attorney General Madigan acknowledged that a number of sub-prime lenders were making similarly risky loans to those unlikely to comply with repayment terms, she called Countrywide "the largest and worst player in the market."
"Countrywide's unfair lending practices have harmed tens of thousands of borrowers, who have been placed in unaffordable loans. As a result, our communities are being destabilized by a skyrocketing number of home foreclosures," continued the IL Attorney General. Madigan delineated that Countrywide relaxed traditional underwriting guidelines to fund their loans, and made their loans to borrowers with in sufficient earnings and personal assets. In some cases, she continued, borrower's income was overstated on loan applications to assure they would qualify.
In Illinois last month, 9,670 homeowners were at some stage of the foreclosure process - an increase of 42% from May, 2007. Madigan estimates the delinquency rates on loans issued by Countrywide or their affiliates between 2005 and the First Half of 2007 were even higher in Illinois than they were in other states across the U.S.
The IL suit against Countrywide seeks to rescind or reform those Countrywide loans which originated using deceptive practices. It also asks for a 90-day stay on Countrywide foreclosures, and restitution to Countrywide borrowers who have lost their home to foreclosure.
The problems impacting Countrywide could point up an even broader issue - were lenders simply feeding on political pressure to increase the percentage of those owning homes across the country? Bert Ely, a Virginia-based Financial Consultant, feels that President Bush and his administration set an well-publicized goal to boost home ownership to record levels.
Indeed, they succeeded!
The rate of home ownership approached 70% in 2004. Due to foreclosures recorded within the last year, however, many of these new homeowners eventually lost the homes they purchased using risky loans, or those with rate resets or high interest rates and fees.
In the First Quarter of 2008, the national rate of home ownership has fallen back to where it was in 2002 - prior to the expansion of aggressive lending policies to increase home ownership.
Read our post from last night via our Dean's Team Chicago Blog Center - BlogChicagoHomes.com - for more info, as well as links and video in yesterday's Chicago Tribune story from contributing writers Susan Chandler and Becky Yerak.
DEAN & DEAN'S TEAM CHICAGO
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