Kroger sues Countrywide

Keith Loria Jul. 14, 2010, 3:34am


SALEM, Ore. (Legal Newsline) - Oregon Attorney General John Kroger announced on Wednesday that he has joined state treasurer Ted Wheeler in filing a lawsuit against Countrywide Financial that says it misled investors into risky mortgage-backed securities.

The lawsuit alleges that Countrywide used tactics to mislead investors into making investment decisions that led to millions of dollars in losses.

"Oregon is currently number three nationwide in foreclosures," Kroger said. "This lawsuit will hold the responsible companies accountable."

Oregon will now partner with the Iowa Public Employees' Retirement System, the lead plaintiff in the case. Other plaintiffs include the General Board of Pension and Health Benefits of the United Methodist Church and the Orange County Employees' Retirement System. The Oregon Public Employee Retirement Fund invested $200 million into home loans and lost $29 million, Kroger says.

The lawsuit, filed in federal court in California, alleges Countrywide violated securities law from 2005-2007 by making false statements to investors, providing misleading information and misrepresenting crucial information provided to investors needed to assess the risks of their investments.

The lawsuit further alleges that the company's ability to originate residential mortgages on such a massive scale was because it could rapidly package loans and then sell them to investors as purported investment grade mortgage-backed securities.

According to the suit, Countrywide issued false documents concerning the mortgage loans in the investment fund, as not all of them had met accepted underwriting standards. Countrywide also claims that its appraisals met acceptable standards, but many allegedly did not provide an accurate portrayal of what the property was worth.

Countrywide was once the nation's largest residential mortgage lender, originating in excess of $850 billion in U.S. home loans in 2005 and 2006 alone.

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