Gregoire accuses Countrywide of predatory lending

Gov. Chris Gregoire has accused Countrywide Financial Corp. of discriminatory and predatory lending practices that targeted minority borrowers and of cheating Washington state out of millions of dollars in fees.

She told a Wednesday news conference at the Urban League office in Seattle that the state Department of Financial Institutions is seeking to revoke Countrywide's license and impose a $1 million penalty for predatory lending practices.

The governor also said that Countrywide cheated the state out of $5 million by underreporting assessments.

Gregoire's announcement came on the same day California and Illinois filed lawsuits against Countrywide, and shareholders of the California-based company approved a takeover by Bank of America Corp.

The lawsuits in California and Illinois claim the distressed mortgage lender misled borrowers into taking on risky home loans.

"We fully intent to make sure our minority home borrowers receive the fair treatment they thought they were getting from Countrywide," Gregoire said.

There was no immediate response to an Associated Press phone request for comment left at the company's headquarters in Calabasas, Calif.

The state's investigation used a sampling of 600 loans serviced by Countrywide, and found 50 loans where terms were violated, Gregoire said.

The impending takeover of Countrywide by Bank of America means states no longer will have any jurisdiction over the lending company, because Bank of America is a federally chartered company, said Deb Bortner, director of consumer services for the Department of Financial Institutions.

However, Bortner said, Countrywide is still responsible for previous loans.

Countrywide has 20 days to pay the penalty or request a hearing with the state Office of Administrative Hearings.

"What we're seeing is that the minorities (are) paying more for a very similar loan" compared to borrowers who were Caucasian, said Bortner, who leads the on-going investigation.

In some cases, minority borrowers with the same credit level as Caucasian borrowers were given adjustable rate loans instead of fixed-rate loans, Bortner added.

The investigation, which started last year, is part of wider efforts by Gregoire and lawmakers to curb the effects of the national subprime mortgage loan crisis on the state.

During the legislative session this year, lawmakers passed a bundle of bills that called for more financial literacy and clearer language in foreclosure notices, sought full financial disclosure from lenders and boosted protections against foreclosure scams.

Overall, Washington state ranks low on seriously past due loans compared to the rest of the nation. Washington is ranked 49th on seriously past due subprime loans and 45th for all types of seriously past due loans, according to the Department of Financial Institutions.

Gregoire said Washington has fared better because of its diverse economy, but is not immune to the subprime mortgage crisis.

"Most importantly, it is about the allegation that this company has preyed on our minority borrowers in an extremely troubling time in our state," Gregoire said.

Bortner said the state may look at other lending companies in the future.

At the news conference, Gregoire was flanked by members of a home ownership task force she created last year to look into lending practices. It includes state representatives and senators and citizens who say they were victims of predatory lending practices.

A 67-year-old black woman, Dixie Mitchell, spoke at the news conference about how her lending company - which was not Countrywide - failed to disclose fees attached to refinancing. Mitchell and her husband owed $260,000 after refinancing their home. Their monthly payments jumped from $1,600 to more than $2,900 after the loan reset and the interest rate increased. Her husband lost his job as well. The couple is now at risk of losing the home they've owned since 1967.

"I've been talking to people, I even called Jesse Jackson, I called everybody," Mitchell said. "This took a long time, we raised nine kids, and keep up with everything, and now we just have to give it all back?"