Ill., Calif. Sue Countrywide

Illinois and California have sued Countrywide Financial, one of the country's largest mortgage lenders. The suits against the company and its chief executive come on the same day Countrywide shareholders approved a takeover by Bank of America.

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ROBERT SIEGEL, host:

From NPR News, this is ALL THINGS CONSIDERED from NPR News. I'm Robert Siegel.

MICHELE NORRIS, host:

And I'm Michele Norris. Countrywide Financial Corporation was the talk of financial circles today. Two states sued the troubled mortgage lender, then its shareholders approved a takeover by Bank of America. Countrywide is at the heart of the current U.S. housing crisis. Attorneys General of California and Illinois alleged the company pushed high-risk loans that led to a massive spike in foreclosures. NPR's Cheryl Corley reports from Chicago.

CHERYL CORLEY: In Illinois, like elsewhere, foreclosures have climbed to unprecedented levels. And for months, the State Attorney General Lisa Madigan has been investigating Countrywide. It's the largest mortgage lender in the state, as it is in the country. Madigan says after pouring over thousands of documents, listening to hundreds of stressed out and homeowners and talking to former employees of the mortgage company, it was time to file a lawsuit.

Ms. LISA MADIGAN (State Attorney General, Illinois): Borrowers were in loans that they didn't understand, they couldn't afford and they couldn't get out of. The failure of these loans is what has caused the foreclosure crisis here in Illinois and across our country. In the aim of today's lawsuit is to hold Countrywide accountable for their conduct.

CORLEY: In the first quarter of this year, Countrywide originated 73 billion dollars in mortgages nationally. And Madigan says many of the loans it provided here were high cost, or subprime loans. Last May, there were more than 96,000 foreclosure filings in Illinois, a 40 percent increase from a year ago. And the foreclosure rate for Countrywide in recent months has doubled in the Chicago area.

Ms. MADIGAN: Much of this comes from Countrywide's greed and their desire to dominate the marketplace. Unfortunately, this came at a very steep price to Illinois homeowners. Our investigation clearly revealed that Countrywide cared for more about its market domination than it did about homeowners and those homeowners staying in their homes.

CORLEY: At Madigan's press conference, Melissa White - a single mother and suburban Chicago special education teacher - explained her foreclosure ordeal. She purchased her two-bedroom home 10 years ago, but refinanced it to pay off medical bills. Her fixed interest rate set at seven percent shifted to an adjustable rate mortgage with a beginning interest rate of 8.75 percent, and she ended up with a foreclosure notice. White says she thought she knew what she was getting into.

Ms. MELISSA WHITE: I read my documents. I am educated. I was told I didn't need a lawyer. I actually brought a friend with me to the closing. I was sold the bill of goods, and there's just so many more out there.

CORLEY: Illinois is not the only state taking on Countrywide. California's Attorney General Jerry Brown announced a similar step today. And the governor of Washington State accused Countrywide of engaging in repeated discriminatory lending practices. Countrywide did not return phone calls today for comment. Kim Rueben, an economist with the Urban Institute, says states may soon coordinate their actions.

Ms. KIM RUEBEN (Urban Institute): The states might be seeing it's a little bit like they saw the tobacco lawsuits - which is what I think the closet analogue might be - in that I think in part they're trying to discourage a behavior they want to see stopped. That is, people getting almost hoodwinked into mortgages they can't afford.

CORLEY: And raising money to help homeowners in foreclosure. Both lawsuits filed in Illinois and California seek an unspecified amount of damages from Countrywide. The legal action, along with other lawsuits filed by the Department of Justice, now become an issue for Bank of America, since today its shareholders approved a company takeover of Countrywide. Cheryl Corley, NPR News, Chicago.

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