At least two lawsuits have been filed against Countrywide Financial Corp. -- which will merge with Bank of America following Thursday's shareholder approval -- by state attorney general offices. More are expected to follow.
The Arizona Attorney General's Office would not comment on any pending investigation or if it would file, but officials said the agency is keeping close tabs on the issue.
"We are closely following the developments regarding Countrywide, especially those related to the businesses in Arizona," said spokeswoman Andrea Esquer.
On Wednesday, AG officials in Illinois and California filed lawsuits against the country's largest mortgage lender.
The lawsuit, filed in Cook County Circuit Court, alleges Countrywide violated the state's consumer protection statutes by making unaffordable loans and failing to make adequate disclosures to borrowers, the Chicago Tribune reported Wednesday on its Web site.
In the California complaint, Attorney General Jerry Brown said Countrywide violated the state's unfair business practices and false advertising laws to market and originate sometimes-risky mortgages.
Mortgage companies are taking a lot of the heat in the current mortgage fiasco, which has spurred more than 1 million foreclosures across the country and hundreds of mortgage company shutdowns.
From March 1 to June 18, 2008, federal authorities have indicted some 400 people on mortgage fraud. Operation Cash Back in Arizona resulted in six mortgage fraud cases in which 36 defendants were charged. In the past week, 30 arrests were made in mortgage fraud-related cases in the Tucson and Phoenix areas, according to the U.S. Attorney's Office and the Federal Bureau of Investigation. The FBI estimates that approximately $100 million in losses were inflicted by these mortgage fraud schemes.
In Arizona, the investigation included the work of the U.S. Attorney's Office, FBI, Internal Revenue Service-Criminal Investigation Division, U.S. Immigration and Customs Enforcement, Department of Housing and Urban Development Office of the Inspector General, U.S. Marshals Service, Arizona Department of Financial Institutions, and the Scottsdale Police Department.
The Illinois and California lawsuits came less than day before shareholders of the embattled mortgage firm approved the bank's acquisition by Bank of America Corp. Holders of more than 69 percent of the outstanding shares of Countrywide common stock approved the transaction.
The merger is slated to close on Tuesday. BofA is expected to cut 7,500 employees over the next two years as a result.
The Federal Reserve this month gave BofA permission to buy the subprime mortgage lender. The Fed said BofA will be the largest deposit-taking institution in the U.S. after the $4 billion purchase, with about $773 billion in deposits.
In late April, Countrywide reported a first-quarter net loss of $893 million, or $1.60 a diluted share. In the same period last year, it posted a profit of $434 million, or 72 cents a share.
The company's provision for loan losses rose to $1.5 billion from $152 million a year ago. Residential charge-offs, or loans written off as not being paid, rose to $606 million in the latest quarter from $39 million in the year-ago period.
In August, Charlotte, N.C.-based BofA (NYSE:BAC) invested $2 billion in Countrywide (NYSE:CFC) for a 16 percent stake.
Arizona continues to be one of the hardest hit states for foreclosures. Only Nevada and California have higher rates. One in every 224 Arizona households is affected by the foreclosure process.
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