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Wednesday, September 3, 2008

Connecticut Files Suit Against Countrywide

Connecticut Attorney General Richard Blumenthal has sued Bank of America Corp.'s Countrywide Financial Corp. for allegedly deceptive lending practices.

Echoing the many other legal complaints against the mortgage lender, the Connecticut lawsuit alleges Countrywide engaged in several types of inappropriate lending behavior and made loans to consumers that were unaffordable or unsuitable for the borrower. The complaint, filed in state court in Hartford, alleges violations of Connecticut's unfair trade practices and banking laws.

"Countrywide conned customers into loans that were clearly unaffordable and unsustainable, turning the American Dream of homeownership into a nightmare," Mr. Blumenthal said.

The lawsuit seeks civil penalties of as much as $100,000 per violation of state banking laws and as much as $5,000 per violation of state consumer-protection laws; as well as disgorgement of any ill-gotten gains and an order compelling the company to cease the disputed practices.

Countrywide -- which became a symbol of the loose lending standards that set the stage for the nation's current mortgage crisis and housing-market implosion -- was taken over by Bank of America in a $2.5 billion deal that closed last month.

"While we cannot comment on pending litigation, we will respond to the AG in due course," a Bank of America spokeswoman said. The spokeswoman noted that since taking over Countrywide in July, Bank of America has been reviewing Countrywide's operations and is "confident that our newly combined company will be recognized as a leader in responsible lending practices."

The spokeswoman also said Bank of America has made several commitments to responsible lending practices, including modifying or working out at least $40 billion in troubled mortgage loans in the next two years to keep customers in their homes; pursuing a 10-year goal to lend and invest $1.5 trillion for community development beginning next year; and no longer originating subprime mortgages -- a practice it stopped in 2001.

By: Chad Bray
Wall Street Journal; August 7, 2008