Countrywide sued for unfair lending; buyout approved

By Martha Graybow and Gina Keating

NEW YORK/CALABASAS, California (Reuters) - Countrywide Financial Corp CFC.N, widely blamed for helping foment the U.S. housing crisis through free-wheeling lending, was sued for alleged deceptive mortgage practices by officials in its home state of California and in Illinois on Wednesday.

Marking the end of an era, shareholders the same day approved the company's takeover by Bank of America Corp (BAC.N) at a closed-door meeting conducted by founder and Chief Executive Angelo Mozilo at its Calabasas, California compound.

The merger is set to close by July 1.

Countrywide became the company most closely associated with the U.S. housing boom -- in which mortgages with low teaser rates were seemingly handed out to anyone who asked -- as well as the real estate market's collapse when shaky borrowers lost their homes to foreclosure when mortgage rates rose.

Mozilo has also come under fierce criticism for his role in the bust. One of corporate America's top-paid executives, he has been under fire from consumer activists, lawmakers and regulators for the company's lending practices and the way it treats borrowers struggling to keep up with mortgage payments.

Mozilo got a standing ovation on Wednesday from the meeting's 300 attendees, many of them employees, said Scott Adams, coordinator for a pension program of the American Federation of State, County and Municipal Employees.

As a handful of journalists waited outside guarded gates at the company's suburban compound, the 69-year-old CEO tearfully recalled that he had received a loan from Bank of America to help co-found Countrywide, and reminisced about the millions of mortgages the company had written over the years, Adams said.

Despite the meeting's reflective tone, "there was a lot of security in there," Adams said, and shareholders were not given a chance to comment on the deal ahead of the vote.