SAN DIEGO (Legal Newsline)-Following in the footsteps of California Attorney General Jerry Brown, San Diego City Attorney Mike Aguirre filed suit against Countrywide Mortgage Co. on Wednesday for allegedly defrauding thousands of the city's homeowners.
Aguirre held a press conference in a home recently taken over by Countrywide. The city attorney told the press he hoped his suit will force lenders to work together with borrowers who are about to lose their homes.
"We are asking that any additional foreclosures be stopped," Aguirre said, "and that the parties come together to work out a reasonable alternative based on values of these properties today so we can stop the spread of this foreclosure disease."
The lawsuit follows the most recent amendment to the complaint filed by Brown, alleging that Countrywide's loan officers coerced buyers into risky adjustable rate mortgages.
Aguirre said he wants to make San Diego a "foreclosure sanctuary."
The San Diego Union-Tribune reported that San Diego is among the hardest cities in California hit by the mortgage crisis saying, "In the second quarter of 2008, foreclosures increased 31 percent over the previous quarter and 180 percent over the second quarter of 2007."
In June, Brown first sued Countrywide alleging misconduct in the sale of loans. Other states, including a prominent lawsuit in Florida that has opponents charging Florida Attorney General Bill McCollum with politicizing the issue, have also sued Countrywide. Washington state and Illinois have also filed similar suits.
Last week, Brown amended his suit in light of what he called "shocking new details," claiming the beleaguered mortgage company ignored its own underwriting guidelines and rewarded employees for selling home loans to customers who presented a high degree of risk.
Aguirre's lawsuit now brings the case against Countrywide down from the state level to the city courts. But, critics of Aguirre accuse him of being highly litigious and starting punitive lawsuits that that produce little more than media attention.
Andrew Jeffery, a former mortgage broker currently working as a Web site editor, said the government's attempts to correct the foreclosure crisis will block the corrective actions already happening in the marketplace.
"Aguirre's heart may be in the right place, (but) foreclosure moratoriums aren't part of the road to recovery for the housing market," Jeffery wrote. "Opportunistic mortgage market participants are buying delinquent mortgages on the cheap, forgiving some part of the debt and giving borrowers a fresh start. Government intervention in this process will simply scare off lenders, since they'll have limited recourse if the loan goes sour."
Aguirre said he plans further lawsuits against other lenders including Washington Mutual, Wells Fargo and Wachovia Corp.