By Patrick O’Brien
Illinois is the first state to sue Countrywide Financial, the nation’s largest mortgage lender, for its role in the current foreclosure crisis.
The lawsuit, filed by Illinois Attorney General Lisa Madigan in Cook County today, alleges that the company used “deceptive practices” to lure borrowers into risky subprime loans with high interest rates. It also says the company “loosened the standards for selling its products,” ignoring whether prospective borrowers could repay the loan.
The suit says the company responded to signs that its mortgage business was unstable by making more risky loans and accelerating the practice of ignoring borrowers’ real financial situations.
The company’s practices were particularly harmful to Chicago and the surrounding counties, the suit says.
The Chicago area had the most subprime loans of any metropolitan area in the country, according to a 2006 study by the Chicago Reporter, an investigative magazine. And Countrywide held more of those loans than any other lender. The Chicago area also has one of the highest foreclosure rates in the country.
The attorney general also says her office has received more than 200 complaints about the company since 2005.
In early 2007, the company issued nearly $8 billion in risky subprime loans, which generally are given to borrowers with poorer credit histories and lower incomes than those given standard loans.
Countrywide’s promotional materials on its Web site tout the bank as a leading lender to those with “less than perfect credit.”
The company is currently the subject of lawsuits by former employees and customers, as well as a federal investigation.
Bank of America actually acquired the company in a $4 billion deal today, as approved by shareholders, and it has promised to tighten lending standards.
Countrywide did not return repeated phone calls.
State employee update
By Bethany Jaeger
The largest public employee union, the American Federation for State, County and Municipal Employees Council 31, is requesting a mediator to help bring closure to about 10 months of negotiations with Gov. Rod Blagojevich’s administration. The union represents about 35,000 state employees and held a massive rally in Springfield earlier this week, increasing attention that the union opposes a contract with the state if it were to increase the cost of employees’ health care and retirement benefits.
According to the union, the administration proposes a four-year contract that would do just that without a wage increase.
The existing AFSCME contract is set to expire June 30. The administration is not commenting on negotiations but confirmed AFSCME’s statement that the existing contract will remain active as a mediator steps into negotiations.
Anders Lindall, spokesman for the union, said the two sides first have to agree on the identity of the mediator, who would be an independent third party without a vested interest in either side. While mediators are common in other labor negotiations, Lindall said this is the first time in 10 contracts with the state that the union has had to request a mediator.