Countrywide subpoened in Illinois
Lisa Madigan is honing in on Countrywide practices in Illinois, and it all started with a broker in Chicago's Lincoln Square neighborhood.
By Sally Duros Real Estate Editor/sduros@suntimes.comA lawsuit against Chicago-area mortgage broker One Source Mortgage Inc. is the starting point for an investigation by Illinois Attorney General Lisa Madigan into possible fraudulent lending practices by Countrywide Financial Corp.
A subpoena was served on Calabasas, Calif.-based Countrywide, the biggest U.S. mortgage lender, seeking documents related to its home mortgage unit, according to Madigan’s consumer protection head, Deborah Hagan.
‘‘We’re looking at Countrywide’s origination practices in Illinois,’’ Hagan said Thursday of her office, the state’s top law enforcement agency.
The investigation into Countrywide follows the Attorney General’s filing of a Nov. 26 lawsuit alleging broker One Source Mortgage Inc. and its president, Charles G. Mangold, duped borrowers into signing complex loans without regard to their ability to repay these loans.
One Source had operated primarily on Chicago’s Northwest side near the Lincoln Square neighborhood.
“We looked at a slice of [One Source] loans,” Hagan said. “Half were coming from Countrywide, and almost all of those loans were pay option ARMs.” An option ARM mortgage is an adjustable rate mortgage that allows a borrower to pay a minimum monthly payment that is only a small portion of the interest owed, and does not pay down any principal. A borrower using this mortgage can pay faithfully month after month and wind up owing more than he or she borrowed.
The subpoena seeks data on the life of Countrywide loans, from origination through their bundling for resale as asset-backed securities, she said.
“Pay option ARMs will not show problems until 2009 and beyond because the borrower can keep making the minimum payment,” Hagan said.
Countrywide brought in $11.4 billion in revenue last year, and in the past 12 months has financed almost $5 billion in loans, of which 45 percent were adjustable rate mortgages, Hagan said.
Countrywide has lost approximately 76 percent of its value this year as subprime mortgage borrower defaults triggered a surge in loan foreclosures.
In November, foreclosures doubled from rates a year earlier, the company said today in a statement. Company spokeswoman Amber Cousins didn’t immediately return a call seeking comment.
Contributing: Bloomberg News
Technorati:
