Illinois AG Sues Countrywide for Alleged Mortgage Discrimination
Illinois attorney general Lisa Madigan filed a lawsuit against Countrywide, alleging it steered African American and Latino borrowers into subprime mortgages and charged them more for it. The bad blood between Countrywide and the state of Illinois goes back a long way. In October 2008, the since-fallen mortgage giant ignored a mandate from the state to cease new lending. Illinois fined Countrywide $185,000 in March 2008 for closing 21 branches without notice. Bank of America completed the purchase of Countrywide in July 2008. That same year, Madigan filed her first lawsuit against Countrywide alleging it played a driving role in the foreclosure crisis. That November, BofA settled with an $8.7bn payout. According this second filing, there were racial disparities in the Countrywide loan data that “could not be explained by objective factors such as borrower’s credit scores or debt-to-income ratios.” "These charges relate to Countrywide practices well before Bank of America acquired the company," according to a statement by BofA. "We are disappointed with the attorney general’s decision to pursue litigation. We have fully cooperated with their investigation and have pointed out significant flaws in the methodology on which these claims are based.” But Madigan won't let BofA off the hook. "Bank of America needs to be held accountable by taking financial responsibility for cleaning up the devastation of the predatory company that it chose to take over," Madigan said. Angelo Mozilo, former CEO of Countrywide, claims the US Securities and Exchange Commission (SEC) admits the lender wasn't eluding investors when it originated risky mortgages. After a two-year investigation into Countrywide lending policies, Madigan's office alleged that in 2006, Countrywide sold higher-cost loans to 50.9% of its African American borrowers and 33.8% of its Latino borrowers, compared to 19.5% of white borrowers. Madigan asked the court to permanently prohibit the alleged practice and force Countrywide to pay $25,000 for each violation of the Illinois Human Rights Act and any other relief the court may find. “It’s disturbingly clear that if you were an African American or Latino borrower who walked into a Countrywide store, you likely paid more for your mortgage than a white borrower,” Madigan said. “Countrywide effectively imposed a surcharge on mortgage loans based on race and ethnicity.” In February, Countrywide settled with the Florida attorney general to pay $16.9m to 2,700 borrowers in the state. In July 2009, Countrywide sent out $7.4m to Texas borrowers after setting with that state's AG. Write to Jon Prior.