Late last week, a former Countrywide Financial Corp. employee and his pal were arrested by the FBI for stealing and selling personal data of mortgage applicants. They estimate that up to 2 million people's identities were compromised by these clowns over a two year period.

The former employee, Rene Rebollo, was a senior financial analyst in Countrywide's subprime lending division, Full Spectrum Lending. His buddy, Wahid Siddiqi, is the one accused of selling the data at $400 to $500 for each batch of "leads." These so-called leads were sold to agents who would solicit the customers for new loans with other mortgage companies.

How did Rebollo take all the personal information? On Sunday evenings, he would copy information on 20,000 people at a time. And the money the two guys got for the personal information amounted to about 2.5 cents per customer.

The State of Illinois has announced that it is suing Countrywide and its CEO for using unfair and deceptive practices in marketing and selling loans. (California's Attorney General, Jerry Brown, filed suit against the beleaguered company today as well.)

Specifically, Illinois's complaint is alleging that Countrywide used underwriting standards that were lax, used "risky features" in loans (do they mean ARMs?), and gave incentives to mortgage brokers who sold loans.

All of this was done to coerce people into buying homes they couldn't afford. If you've read any of my past pieces on the "mortgage crisis," you see that I don't accept this theory that zillions of homeowners were hoodwinked when applying for mortgages. I do accept that some people didn't know what they were signing up for, but that's their own fault. If you can't understand your mortgage, you shouldn't get one. Be a happy renter.

I don't accept the argument that it's the mortgage company's fault for offering attractive mortgages. At the end of the day, if a buyer couldn't afford a house, he shouldn't have bought it. And with very few exceptions, home buyers are well aware of what they can and cannot afford. It's simple math: Money in, money out.

Mortgage expert David Reed invites Walletpop readers to ask him questions about real estate financing. leave your questions in the comment section of this post.

Q: Unfortunately, I had no choice but to file bankruptcy to save my home from foreclosure. Countrywide initially said it would modify my loan to bring it to a more reasonable rate, but then declined at the last moment. Are banks working with people like myself who have had to file bankruptcy to modify home loans?

A: Only the servicing lender can modify a note, in your instance it would be Countrywide. If another lender replaced your current note with Countrywide it would then be considered a refinance and not a note modification. Conventional loans ask that two years elapse before entertaining a refinance. I would suggest that you keep trying with Countrywide to see if they'll budge. I don't know all the specifics about your situation but you might also want to explore the FHASecure program from an FHA lender to see if you qualify for this new rescue program.- David

Real estate finance expert David Reed is president of CD REED Mortgage Bankers in Austin, TX and author of Mortgage Confidential: What You Need to Know That Your Lender Won't Tell You and Mortgages 101: Quick Answers to over 250 Critical Questions About Your Home Loan.

Countrywide has just announced a plan to "help out" more borrowers who are in trouble on their home mortgages, particularly the ones with adjustable rates. The goal is to help people avoid foreclosure through a change in repayment terms. If you've got a loan with Countrywide and you're behind on your payments, now may be the time for you to cash in.

Full details of this new plan aren't available quite yet, but this looks to be something that's going to piggyback on the previous program that would allow borrowers to keep their low "teaser" rates. Of course, there are some crying that the poor homeowners aren't being helped enough.

I say hogwash! Borrowers got into adjustable rate mortgages with the knowledge that interest rates could increase once it came time for their rates to reset. They knew they'd probably have to refinance (maybe at higher rates), but took the risk on the interest rates anyway. Many of them bought more expensive houses than they could afford, banking on the hope that interest rates would stay low. But now it's time to pay the piper, and someone should bail them out?

I'll tell you what... I have my mortgage through Countrywide, and it's at an adjustable rate. When it comes time for my rate to reset, somebody BETTER help me out. I've never had one late payment, but that better not stop them from giving me a good deal on my new rate. And if it does stop them, then I'm prepared to do what's necessary to get a better rate. As I said in the past, I think it's time for me to lower my credit score a bit and get on the gravy train. No sense in being a responsible borrower these days!

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.

Foreclosures seem to be on the rise, but mortgage companies don't always get a slam dunk when it comes to taking your home from you. In order to foreclose, they've got to have their paperwork in order, something that's not always a given. With mortgages being sold over and over, sometimes companies don't have sufficient documentation to succeed with the foreclosure.

Countrywide Financial Corporation found a way to solve this problem, but it didn't make a judge too happy. The company created false documentation in an effort to prove it had sent certain letters to a homeowner, when in fact Countrywide hadn't sent her those letters.

After successfully completing a Chapter 13 bankruptcy period of 60 months, Countrywide accused the homeowner of having unpaid fees from that bankruptcy period. No dice. Countrywide didn't bring it up during the bankruptcy, so it can't now try to get extra money from her.