NM sues Countrywide over securities
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8/20/2008 - 8/20/08
Countrywide Financial Corp. has been sued by New Mexico's investment and pension funds, which accuse the company of misleading investors.The lawsuit — filed on behalf of the state Investment Council, the Educational Retirement Board and the Public Employees Retirement Association — accuses the mortgage lender of duping investors about the value and safety of mortgage-backed securities.
The lawsuit, filed Friday in state district court in Santa Fe, also names a number of Countrywide affiliates as defendants.
The Associated Press called Countrywide on Wednesday seeking comment on the lawsuit, but the Calabasas, Calif.-based company did not immediately respond.
The company, once the nation's largest mortgage originator before a jump in bad loans decimated its business, has been blamed for helping to cause the nation's mortgage meltdown.
Countrywide was sued earlier by California, Connecticut, Florida, Illinois and the city of San Diego over its lending practices.
The lawsuits make similar allegations that Countrywide conned homeowners into mortgages they could not afford.
New Mexico's lawsuit differs because it refers to securities backed by shaky mortgages.
The Investment Council spent $372.7 million on such securities, the lawsuit said.
The Educational Retirement Board bought about $2.3 million in the securities, and the Public Employees Retirement Association invested about $20.4 million, the lawsuit said.
The lawsuit alleges the defendants claimed the mortgages backing the securities "were originated and verified using prudent, defined loan underwriting guidelines. They were not."
"Defendants and their subsidiaries routinely ignored their own stated underwriting procedures and guidelines in an effort to generate high volume loan business regardless of credit risk, and shifted bad loans upon unsuspecting ... investors," the lawsuit said.
Some false information about the securities was contained in a prospectus issued to investors, the lawsuit said.
The lawsuit also cites various statements by company executives that later were brought into question.
