The California attorney general is suing Countrywide Financial Corp for allegedly tricking borrowers into taking on risky home loans they didn't fully understand. Countrywide was one of the biggest lenders of mortgages in the Central Valley, where foreclosures are flourishing.

Ironically, the lawsuit, which Countrywide officials didn't immediately comment on, came on the same day shareholders approved its merger with Bank of America. According to an AP story, the lawsuit claims Countrywide misled customers about the workings of home-equity loans, adjustable-rate mortgages and other exotic loan types.

Government officials of all types are trying to root out blame for the foreclosure crisis nationwide, which could lead to some new laws and restrictions. That's good, I guess, but there's plenty of blame to go around.
Here's the AP story:

Calif. attorney general sues Countrywide Financial
Eds: UPDATES with details on lawsuit, effort to reach Countrywide.
Moving on general news and financial services.
By ALEX VEIGA
AP Business Writer
LOS ANGELES (AP) — Countrywide Financial Corp. is accused of
using misleading advertising and other unfair business practices to
trick borrowers into taking on risky home loans they didn’t fully
understand, in a lawsuit filed Wednesday by the California attorney
general’s office.
The lawsuit — filed on the same day Countrywide shareholders
were scheduled to vote on the company’s takeover by Bank of America
Corp. — stems from information gathered under subpoena after the
state launched a probe last year into the troubled company’s
business.
It also came on the same day the Illinois attorney general was
filing a lawsuit alleging that Countrywide engaged in “unfair and
deceptive” practices to get homeowners to apply for risky
mortgages far beyond their means.
In the complaint filed in Superior Court, California Attorney
General Jerry Brown asserts that Countrywide violated the state’s
unfair business practices and false advertising laws with just
about every action it took to market and originate some of the most
popular — and potentially risky — types of home loans in recent
years.
“Defendants viewed borrowers as nothing more than the means for
producing more loans, originating loans with little or no regard to
borrowers’ long-term ability to afford them and to sustain
homeownership,” the state claims in the suit, which also names as
defendants Countrywide Chairman and CEO Angelo Mozilo and David
Sambol, the lender’s chief financial officer.
Countrywide did not immediately return a call seeking comment.
The state claims the company misled customers about the workings
of home-equity loans and some types of adjustable-rate mortgages,
including pay-option loans, “hybrid” interest-only loans and
low-documentation loans.
These loan types, which many other lenders offered during the
housing boom, featured low initial payments and the potential for
sharp increases after a few years. They now account for a large
portion of the mortgages that have become delinquent or gone into
default in the past year.
The lawsuit alleges Countrywide obscured the potential risks in
the loans, misled consumers about payment terms, prepayment
penalties and other obligations, and told borrowers they would be
able to refinance before the interest rate on their loans adjusted.
“Defendants knew, or by the exercise of reasonable care should
have known, that these statements were untrue or misleading at the
time they were made,” the lawsuit states.
As the nation’s largest mortgage lender and servicer,
Countrywide has been under scrutiny by federal and state
authorities. It also faces numerous other lawsuits related to its
lending practices.
The Calabasas, Calif.-based lender agreed in January to sell
itself to Bank of America for about $4 billion in stock. The
acquisition, now valued at around $2.8 billion, received clearance
from the Federal Reserve earlier this month.
Assuming shareholders give their approval, Charlotte, N.C.-based
Bank of America has said it could close the deal as early as July
1.