Illinois targets mortgage lender

By Patrick O’Brien
Illinois is the first state to sue Countrywide Financial, the nation’s largest mortgage lender, for its role in the current foreclosure crisis.

The lawsuit, filed by Illinois Attorney General Lisa Madigan in Cook County today, alleges that the company used “deceptive practices” to lure borrowers into risky subprime loans with high interest rates. It also says the company “loosened the standards for selling its products,” ignoring whether prospective borrowers could repay the loan.

The suit says the company responded to signs that its mortgage business was unstable by making more risky loans and accelerating the practice of ignoring borrowers’ real financial situations.

The company’s practices were particularly harmful to Chicago and the surrounding counties, the suit says.

The Chicago area had the most subprime loans of any metropolitan area in the country, according to a 2006 study by the Chicago Reporter, an investigative magazine. And Countrywide held more of those loans than any other lender. The Chicago area also has one of the highest foreclosure rates in the country.

The attorney general also says her office has received more than 200 complaints about the company since 2005.

In early 2007, the company issued nearly $8 billion in risky subprime loans, which generally are given to borrowers with poorer credit histories and lower incomes than those given standard loans.

Countrywide’s promotional materials on its Web site tout the bank as a leading lender to those with “less than perfect credit.”

The company is currently the subject of lawsuits by former employees and customers, as well as a federal investigation.

Bank of America actually acquired the company in a $4 billion deal today, as approved by shareholders, and it has promised to tighten lending standards.

Countrywide did not return repeated phone calls.

State employee update
By Bethany Jaeger
The largest public employee union, the American Federation for State, County and Municipal Employees Council 31, is requesting a mediator to help bring closure to about 10 months of negotiations with Gov. Rod Blagojevich’s administration. The union represents about 35,000 state employees and held a massive rally in Springfield earlier this week, increasing attention that the union opposes a contract with the state if it were to increase the cost of employees’ health care and retirement benefits.

According to the union, the administration proposes a four-year contract that would do just that without a wage increase.

The existing AFSCME contract is set to expire June 30. The administration is not commenting on negotiations but confirmed AFSCME’s statement that the existing contract will remain active as a mediator steps into negotiations.

Anders Lindall, spokesman for the union, said the two sides first have to agree on the identity of the mediator, who would be an independent third party without a vested interest in either side. While mediators are common in other labor negotiations, Lindall said this is the first time in 10 contracts with the state that the union has had to request a mediator.

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Bills on the move

The Illinois General Assembly is quickly moving a lot of legislation this week since returning from a two-week spring break. Here's a sample of bills to watch, which is an addendum to the list published in Illinois Issues magazine this month:

State Board of Education revamp
HB 4232: The state's education board would be revamped and newly appointed by the governor, but he or she would have a select pool of candidates vetted and chosen by a panel of state lawmakers under a measure sponsored by Rep. Lou Lang, a Skokie Democrat and frequent critic of Gov. Rod Blagojevich's administration meddling in state agency business. He said on the House floor that while he's not pointing his finger at any education board members, “the system we have in place is a system that does not foster independent advocacy for children.”

Such opponents as Blagojevich ally Rep. Jay Hoffman, a Collinsville Democrat, said the idea of terminating all current board members goes overboard and ignores the fact that Blagojevich revamped the board during his first term. “It has been fixed,” Hoffman said during floor debate. “Unfortunately, this is a solution looking for a problem that doesn't exist. We have a better state board today than we have ever had in the State of Illinois.” Rep. Barbara Flynn Currie, a Chicago Democrat and chamber leader, also opposed the measure, saying the extra layer of bureaucracy could actually create less accountability, less transparency and less teamwork than the board has today. She said if the chief executive fails to appoint people who are up to the task, there's a place to hold that official accountable: “It's called the next election.”

The measure's future in the Senate could be bleak if Senate President Emil Jones Jr., who was a Blagojevich ally in the past, chooses not to call the measure for a vote. Lang pointed to a similar proposal he floated last year to revamp the Illinois Gaming Board in the name of making it more independent and shielded from political influence. That's still in the House, too.

Foreclosure assistance
SB 1979: Homeowners in need of financial assistance to avoid losing their homes would receive grants under a measure approved by the Senate. Sponsored by Chicago Democratic Sen. Rickey Hendon, it would allow grants to lenders if the lender agreed to freeze the foreclosure process and negotiate with the homeowner. It now goes to the House.

College campus violence
SB 1881: Bail would be denied to individuals who make terrorist threats of large-scale violence, such as the threat made last month at Southern Illinois University in Carbondale, under a measure approved by the Senate. The sponsor, Alton Democratic Sen. William Haine, said the proposal would slow down the legal process so threats of campus violence could be investigated properly.

Smoking ban exemptions
SB 2006: Another attempt to relax the state's smoking ban, this one to allow veterans' homes to permit smoking, passed the Senate. Sponsored by Rushville Democratic Sen. John Sullivan, the proposal is one of multiple attempts to change the law to allow some groups to smoke in public places.

Early childhood education
HB 5038: The state would dedicate more money to education programs aimed at children age 0 to 3 under a measure approved by the House. Funding programs for the youngest children is a growing trend as more research shows the earliest investments pay off in the long run (see Illinois Issues, April, page 6). It now goes to the Senate.

HB 4705: The House also unanimously approved an extension of Blagojevich's first-term program Preschool for All, which first funds state-sponsored preschool for children from low-income neighborhoods who are considered at risk of academic failure. The extension, albeit by only two years, would allow Illinois to extend available funding to children from middle-income families, as planned when the governor initiated the first phase.

Follow the money
HB 4765: Illinois taxpayers would have a one-stop shop to find out how their public dollars were spent under a measure unanimously approved by the House. Rep. Michael Tryon, a Crystal Lake Republican, sponsored the measure to create a Web site that would track all money spent on all districts, all state contracts, all state employees and all tax credits, and then some, to improve government transparency. His idea is modeled after Missouri's Web site, www.Mapyourtaxes.mo.gov. The state's Central Management Services estimates the cost to be $100,000 a year, according to Tryon, who rebutted that the state would save money if contractors became more competitive when bidding for state business. “In this day and age especially in Illinois, and I know we share the concern when we turn on the TV and we open up the newspaper and we're seeing the U.S. attorney saying [we have] pay to play on steroids,” Tryon said during floor debate. “We should be a leader in this, and I hope we see this in action by this time next year.”

Overdue bills
HB 5898: The governor's annual budget proposal would have to include the amount of overdue bills and would require Illinois to pay bills within a month of being submitted under a measure approved by the House 101-3. It also would increase the interest rate if the state took more than 60 days to pay the bill. Rep. David Winters, a Shirland Republican, said he supported the measure because it would help make the state budget more transparent when Illinois lacks the money to pay for new programs. Rep. Elaine Nekritz, a Northbrook Democrat, voted present and said the proposal as written doesn't allow the state enough flexibility if it had a tight cash flow, a concern shared by the governor's budget office (scroll down to see the balanced budget note).

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