UPDATE 2-San Diego sues Bank of America to block foreclosures

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By Marty Graham

SAN DIEGO, July 23 (Reuters) - San Diego City Attorney Michael Aguirre said on Wednesday he filed a lawsuit against Bank of America Corp (BAC.N: Quote, Profile, Research, Stock Buzz) and its Countrywide unit to prevent the mortgage lenders from foreclosing on homes in his city, which he aims to make a "foreclosure sanctuary."

Aguirre plans to file similar lawsuits against Washington Mutual Inc (WM.N: Quote, Profile, Research, Stock Buzz), Wells Fargo & Co (WFC.N: Quote, Profile, Research, Stock Buzz) and Wachovia Corp (WB.N: Quote, Profile, Research, Stock Buzz) in an effort to make the lenders negotiate with mortgage borrowers facing foreclosure.

"We would like to see San Diego become a foreclosure sanctuary," Aguirre said.

Housing markets across Southern California, including the city of San Diego and the county of the same name, are seeing steep increases in foreclosure rates because so many homes bought there earlier this decade involved subprime mortgages and other types of risky loans.

So far this year, 20,000 homes in San Diego County, population 2.9 million, have been lost to foreclosure as borrowers fail to keep up with mortgage payments and some analysts forecast the number may rise to 40,000 by the end of the year.

"We haven't seen the lawsuit and can't comment," said Bank of America spokeswoman Shirley Norton.

In statement provided by Norton, Bank of America said it has been reviewing in detail Countrywide's operations since acquiring the lender earlier this month and the combined company will not sell subprime mortgages.