Indiana has filed a lawsuit accusing Countrywide Financial Corp. of misleading borrowers.

Steve Carter, the state's attorney general, announced the suit Sunday. It was filed Friday in the Steuben County Court.

Mr. Carter is the fifth state attorney general to file such a suit against Countrywide, after his counterparts in California, Connecticut, Florida, and Illinois.

Mr. Carter alleges that Countrywide's incentive structure encouraged employees and loan brokers to originate risky loans, and that the lender used deceptive or misleading language regarding fees, interest rates, prepayment penalties, and other important terms.

The suit also claims that Countrywide, which Bank of America Corp. acquired last month, improperly inflated some borrowers' income on applications to ensure they would be approved for loans.

Indiana is seeking damages of up to $15,500 for every violation.

"A pattern of misleading and questionable practices has emerged from our investigation into home loans. These unfair lending practices may have harmed thousands of people and, in turn, negatively affected our communities and neighborhoods throughout the state," Mr. Carter said in a press release.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.