Following the lead of other states in recent days, Florida Attorney General Bill McCollum filed a lawsuit against Countrywide and its CEO last night in Broward County on behalf of customers of the company. The suit states that the company was lax in its due diligence regarding the credit worthiness of many loan recipients, and did not explain the long-term implications of the loans to their customers. The AG's office is also accusing the lender of using inflated appraisals in order to qualify borrowers who could not afford their loans to start with. Citing an increased number of complaints filed with the Office of the AG in recent months, the state is asking borrowers who believe that they have been "victimized" to step forward.
There is also language in the suit that may allow the state to pursue legal action on behalf of companies that bought Countrywide's loans in the secondary market without knowing the risk involved (What about their due diligence?). This is set to be another ugly stage for the beleaguered lender on the day that Bank of America announced that the merger/acquisition had successfully made its way through the necessary hurdles.
So, expect more Congressional hearings and jawing about the lack of protection for loan consumers, and also expect this move to push lenders to continue to tighten loan requirements in order to cover their rear ends.
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