West Virginia Attorney General Darrell McGraw has filed suit against a mortgage lender, alleging it sold loans on terms that were "unaffordable and unconscionable," McGraw said at a news conference Tuesday.

The suit against Countrywide Financial Corp., Countrywide Home Loans Inc., Countrywide Home Loans Servicing LP, Full Spectrum Lending Inc. and Countywide's chief executive officer Angelo R. Mozilo was filed Tuesday in Putnam County Circuit Court.

West Virginia is the fifth state to file against Countrywide for its lending and servicing practices. Other states are: California, Illinois, Florida and Connecticut.

The suit alleges Countrywide offered mortgage loans with "flexible underwriting standards. Some of loans required no or little documentation, were down-payment free, had adjustable rates, were interest only or allowed pay options with monthly payment less than the amount of accrued interest," according to the suit.

For example, Countrywide made loans that required no down payment. However, after 15 years of payments, the consumer owed a balloon payment totaling almost the original amount borrowed, according to the lawsuit.

In one case, a consumer couldn't afford to refinance because the home appraisal was inflated from $27,100 to $65,000, according to the suit.

Countrywide also "engaged in unfair and deceptive acts or practices in servicing loans," according to the suit.

For example, Countrywide charged consumers for appraisals for property even when Countrywide had no intention of lending the consumer money, according to the suit. In other cases, consumers were not notified prior to closing that they would not receive a loan or were denied a pre-approved loan after a property was under contract, according to the lawsuit. 

These servicing and lending practices have exposed consumers to foreclosure and the loss of their homes, McGraw said. But there is a broader issue, he said.

West Virginia Attorney General Darrell McGraw has filed suit against a mortgage lender, alleging it sold loans on terms that were "unaffordable and unconscionable," McGraw said at a news conference Tuesday.

The suit against Countrywide Financial Corp., Countrywide Home Loans Inc., Countrywide Home Loans Servicing LP, Full Spectrum Lending Inc. and Countywide's chief executive officer Angelo R. Mozilo was filed Tuesday in Putnam County Circuit Court.

West Virginia is the fifth state to file against Countrywide for its lending and servicing practices. Other states are: California, Illinois, Florida and Connecticut.

The suit alleges Countrywide offered mortgage loans with "flexible underwriting standards. Some of loans required no or little documentation, were down-payment free, had adjustable rates, were interest only or allowed pay options with monthly payment less than the amount of accrued interest," according to the suit.

For example, Countrywide made loans that required no down payment. However, after 15 years of payments, the consumer owed a balloon payment totaling almost the original amount borrowed, according to the lawsuit.

In one case, a consumer couldn't afford to refinance because the home appraisal was inflated from $27,100 to $65,000, according to the suit.

Countrywide also "engaged in unfair and deceptive acts or practices in servicing loans," according to the suit.

For example, Countrywide charged consumers for appraisals for property even when Countrywide had no intention of lending the consumer money, according to the suit. In other cases, consumers were not notified prior to closing that they would not receive a loan or were denied a pre-approved loan after a property was under contract, according to the lawsuit. 

These servicing and lending practices have exposed consumers to foreclosure and the loss of their homes, McGraw said. But there is a broader issue, he said.

"Bogus appraisals and loan [practices] affect the quality of the neighborhood," he said. If a home is appraised too high, neighborhood property values rise, which can increase taxes, he said.

Or, if a neighborhood home is foreclosed upon, property values drop and the neighborhood homeowners lose equity in their homes, he said.   

The suit seeks an injunction against Countrywide to stop the alleged practices and an order that all contracts and loan agreements using these practices be rescinded. Also, the suit asks that the consumers be awarded lost money and that Countrywide delete any negative reported credit history.

Requested monetary penalties against Countrywide include $5,000 per violation and attorney's fees, according to the lawsuit.

Between 30 and 50 West Virginia consumers have made complaints about Countrywide to the Attorney General's office, assistant attorney general Kimberly Stitzinger Jones said.

The company must respond to the lawsuit within 20 days, she said.

Jones said other mortgage companies in the state are using similar practices, but would not say if the attorney general's office was investigating.

A consumer wishing to file a complaint about a consumer matter may call the Consumer Protection Hotline at (800) 368-8808 or by visiting www.wvago.

Reach Sarah K. Winn at sarahkw...@wvgazette.com or 348-5156.