UPDATE 1-West Virginia sues Countrywide over mortgages
(Adds Bank of America comment, complaint details, byline)
By Jonathan Stempel
NEW YORK, Aug 13 (Reuters) - West Virginia sued Countrywide Financial Corp accusing the mortgage lender, now owned by Bank of America (BAC.N), of making risky and costly loans to consumers who could not afford them.
Darrell McGraw, the state's attorney general, filed the lawsuit against Countrywide and its co-founder and former chief executive, Angelo Mozilo, on Tuesday with the Putnam County Circuit Court.
West Virginia is at least the fifth U.S. state to sue Countrywide over its business practices, joining California, Connecticut, Florida and Illinois. Another state, Washington, has threatened to revoke Countrywide's lending license.
Shirley Norton, a Bank of America spokeswoman, said the Charlotte, North Carolina-based bank had not reviewed the complaint, but was committed to responsible lending practices.
Countrywide was based in Calabasas, California, and had been the largest U.S. mortgage lender before Bank of America bought it on July 1 for $2.5 billion.
West Virginia asked the court to order Countrywide to rescind or reform all improper mortgages, make restitution to borrowers, and pay a fine.
According to the complaint, Countrywide improperly induced consumers to take out "unconscionable" loans, when there was "no reasonable probability" they could be repaid.
The lender also took advantage of consumers' ignorance or inability to understand what they were doing in extending credit, the complaint said.
McGraw said Countrywide improperly enticed consumers with loans that required no down payments, as well as with adjustable-rate mortgages that carried low initial "teaser" rates but which later reset at much higher rates.
The attorney general also said Countrywide inflated appraisals, saddling consumers with home loans that they were later unable to refinance.
According to the lawsuit, 50.6 percent of all subprime adjustable-rate mortgages and 33.6 percent of all subprime home loans in West Virginia were delinquent or in foreclosure in the fourth quarter of 2007. (Editing by Lisa Von Ahn, Leslie Gevirtz)
