Countrywide Mortgages To Be Modified To Provide Relief

SPRINGFIELD, Ill. — Facing a lawsuit over deceptive mortgage practices, Bank of America Corp. is agreeing to pay more than $8 billion to modify hundreds of thousands of loans to keep people from losing their homes.

Charlotte, N.C.-based Bank of America said Monday it will modify troubled mortgages with up to $8.4 billion in interest rate and principal reductions for nearly 400,000 customers of Countrywide Financial Corp., the troubled mortgage lender it acquired last summer.

The announcement arrived after the Illinois attorney general's office said Sunday that the bank was modifying loans for customers in 11 states.

Some borrowers stuck with Countrywide customers might qualify for having to pay nothing but interest for a decade. Even people who can't afford to keep their homes with such changes will be able to get help moving to a new home.

"This is going to provide a tremendous amount of relief," said Illinois Attorney General Lisa Madigan.

Her office and officials from California negotiated the settlement; Illinois and California sued Countrywide earlier this year. Nine other states have also joined the settlement, and other states could sign on, said Deborah Hagan, chief of Madigan's Consumer Protection Division.

In California alone, the settlement will offer $3.5 billion in relief. For Illinois, that would translate to $190 million.

"Countrywide's lending practices turned the American dream into a nightmare for tens of thousands of families by putting them into loans they couldn't understand and ultimately couldn't afford," California Attorney General Jerry Brown Jr. said in a statement Sunday.

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The other states joining the settlement are Arizona, Connecticut, Florida, Iowa, Michigan, North Carolina, Ohio, Texas and Washington.

Bank of America said it will launch the new mortgage aid program in December.

In a statement, Barbara Desoer, president of Bank of America's mortgage, home equity and insurance services, called the plan "a comprehensive program that provides more solutions than ever before to assist troubled borrowers and put them back on the path to sustained home ownership."

The mortgage aid includes revising customers' payments so they don't exceed 34 percent of income. Other options include reducing interest rates and adjusting principal so that borrowers don't wind up actually losing equity under some payment plans.

Countrywide will not charge loan modification fees and will waive prepayment penalties.

Madigan said she hopes the settlement could serve as a model for steps that other lenders could take to make up for misleading mortgage practices. She stressed that the agreement involves no tax money but will help people keep their homes and keep money flowing to lenders

"This settlement will help homeowners stay in their homes, which ultimately helps investors and also helps communities," said Madigan, a Chicago Democrat.

Comments

[betabeta]

end... Lenders like CountryWide need strong regulation... and bad! The 1st time buyers should be required to complete at least 8 hours of training (from an outside entity with nothing to gain) on home mortgages before being allowed to buy a home or refinance an existing property.

[betabeta]

continued.... However, after experiencing their tactics, I can see how a first time home buyer would fall for it. They give you all of these reasons why you deserve to have the best there is and then reassure you your salary will catch up to pay the higher note in years to come by showing you average salary growth in your area over the past few years and other meaningless data. If was a young 20 something, 1st time homebuyer I probably would have fell for it. Thank goodness I wasn't.

After reading this, and seeing what has happened to other that fell for these tactics on the news I regret giving them my business. I feel like I'm rewarding a thief everytime I submit my mortgage payment.

Oh and by the way, they contact me at least once a month trying to get me to take the equity out of my house... now mind you I have only been in this house about 18 months so the equity that is there is mostly the 20% I put down when I purchased the house. Gosh how stupid do these people think I am?!!! I put 20% down and pay extra principle every month because I want to pay the dang thing off in 15 vs 30 years, why in earth would I want to turn around and take that money out unless it was a life and death emergency.

[betabeta]

I don't have a subprime. I purchased my home in 2007 @ 6.25% for 30 years conventional with 20% down in 2007. I also purchaed a home 150K less than what Countrywide had qualified me for. Even as let as 2007 they were still putting on the pressure, trying to get me to select an intrest only ARM and keep my 20% in my pocket for furniture and such (their words, not mine). They also wanted to know why I was "settling" for a 1980s house when I qualified for brand spanking new with all the bells and whistles. And of course my Real Estate agent at the time was in total agreement (more comission for her).

Being that this was my second time buying a home, I knew to stay away from products that I couldn't describe intelligently on my own, or I would have to worry about if my salary didn't increase over time. So I got a new RE agent that saw things the way I did, found a nice older home in a very nice neighborhood and did my 30 year fixed conventional with Countrywide.

[DrFunkenstein]

I know you guys are friendly with Lori Mozilo, but this is a historical settlement for predatory lending and it is buried with the most bland headline imaginable. More than any other lender, Countrywide was responsible for the financial meltdown, putting even Ameriquest to shame for abusing people who, almost by definition, have little understanding of debt as subprime borrowers.

Furthermore, there is no mention that CEO Angelo Mozilo and president David Sambol are still facing prosecution for predatory lending, misstating the companies financial health to investors and insider trading. They were rejected as part of the settlement, but your version of the story makes no mention of this significant detail.

[Rule Of Law]

once more--

I have no illusions that the People will win this class war, unless we become mush more serious about it, but just this little adjustment, shows the weakness in the argument of those who still want to lay the fault for this crisis at the feet of the people most hurt by it!

[Rule Of Law]

much, not mush--that's what we should be getting away from!

[californiadreamer]

Beware of anything that the bank offers, even under threat of a lawsuit. Turns out only certain borrowers are going to get help. I called Countrywide this morning after reading LA Times. Someone told me that we did not qualify because we were current. Staying current has been very difficult but we wanted to restructure through the government housing bill, official as of Oct 1. So now we are waiting for clarification. Believe you me, there are lawyers making good money figuring out how to deal with lawsuits at the least risk and cost to Countrywide/BofA. The government program- Hope for Homeowners- is a joke since it is voluntary with lenders. Furthermore, the lender will say that they cannot modify loans as they are bundled and re-sold and that those investors would have the right to agree to modification or not. The numbers have been crunched and they are not going to give anything away that they don't think is toxic. As this crisis deepens and more banks are put in jeopardy, the last thing homeowners should do is trust the banks. I can only hope that the lawmakers who have promised to do so like Pelosi and Frank will hold true to their comments and figure out how to help the homeowners. Predatory lenders don't suddenly change their spots and no one should count on them helping out. Every dollar they give up is one less dollar for their bonuses.

[KillTheMessenger]

"As this crisis deepens and more banks are put in jeopardy, the last thing homeowners should do is trust the banks."

That was just as valid BEFORE the crisis. The person or institution who loans you the money for your home is not, and never was, your friend. They are conducting one part of a business in which you, ultimately, are the source of their income.

[Rule Of Law]

Are you in cash? That can be recalled, renamed, reprinted, removed.

Are you in gold/silver? That can be made illegal to own just like in 1934 when they called it all back and shipped it to of all place, Germany.

Are you in real estate? The Corporatists can use eminent domain, The Patriot Act or any of a dozen "laws" Bush has decreed that we don't even know about yet to take it all from you, and there will be nothing you can do.

Unless you are a 1%er and protected from on high, the next knock on your door may be a Blackwater goon, come to take you in for "questioning."

No one is safe anymore. The reasons you came to this country for are dead. This is Fascism, and you, better than most, understand what that means.

[madzippy]

Yeah, sucks for the rest of us who were playing by the rules. Now these people get a windfall...

[Cautious]

WHY IS THIS STORY NOT ON THE FRONT PAGE AS A RED BANNER HEADLINE? 400,000 MORTGAGES ARE BEING RENEGOTIATED TO KEEP PEOPLE IN THEIR HOMES. THIS IS WHAT WE WANTED.

[veggiequeenmo]

not everyone in subprime loans is bad. we had leagl problems for several years and in fact are still paying for our attorneys fees. these legal problems had to do with my stepson and his mother. long story. anyway, the lawyers charged us thousands and thousands of dollars to defend ourselves and the boy. we either had to pay the attorney in order to make sure the boy was protected or pay bills. we chose the boy. from that, out credit took a dive even though we tried to work with our creditors and mortage holder. they refused even with proof! our mortage readjusted last summer - up $440/mth. that's insane! the mortgage lender will not work with us. period. we have tired over and over again but they keep coming up with some excuse not to help - we make too mucn, we don't make enough. we know other people have the same type of issues - legal, medical, whatever. some of our other creditors were more than willing to help - suspend payemts for 6 mos, accept smaller ones without penalty, etc., but the mortgage lender - no way. they are greedy crooks.

[dadw5boys]

It is the Sub Prime plus Over Valued property .

[darthdarcy]

That's the ticket...fix these Sub Primes first and foremost reset them and forgive all penalties to date 1/2 or more of which are illegal any as reported and is record..

[ricitizen]

Obama releases Keating 5 youtube documentary. Almost 31,000 views already.

See it. Send it to you every voter you know, regardless of party. Sunlight is the best disinfectant.

http://www.youtube.com/watch?v=g72BuIvMbWY

[texastrixie]

If we actually get mortgages for our $770 billion, the government would make money on this deal. You can restructure these loans as 40 yr mortgages, and get the payments down to apartment rent level. Most of the sub-prime people will never be able to afford to buy another house, and they might actually stick in a house where they can afford the payments. Even if they will eventually walk away with little, if anything from a future sale of the house, most people want a house for their kids, and so their kids can go to a good school.

Have you ever calculated what house payments actually add up to? A $100 house is supposed to actually cost you something like $250k-$350k, by the time you make all the payments.

[KillTheMessenger]

What you are suggesting is to bankrupt the government and these people at the same time. A 40 year mortgage product means basically involuntary servitude. Nobody who is any older than 25 years of age can EVER hope to pay off the mortgage and own their house. At which time they will indeed have spent several times the value of the house on it.

"Have you ever calculated what house payments actually add up to?"

Yes. I do it all the time. That's why I always limit my payment schedule to 15 years max.. Both houses that I own were basically paid back in seven years or less. Of course, they are not the shiniest ones on the block. They don't have to be. I am not Cinderella and I do not need a golden pumpkin for a carriage. What I do need is financial SECURITY. And if I sell these properties now, I will not have lost any money on them. They were cheaper to own than renting would have been.

[KillTheMessenger]

"Some borrowers stuck with Countrywide customers might qualify for having to pay nothing but interest for a decade"

How, exactly, is that going to help the people stuck in these mortgages? Interest only loans are financial suicide. They pretty much mean that the bank gets fixed income (which is good for the bank), the borrower is exposed to decade long risk (of losing his job and thus the house) without ANY hope to ever recoup any of their payments.

People, wake up! The compound interest formula is only your friend if you learn to use it and respect its consequences.

[gentlewomanfarmer]

This is, unfortunately, slightly out of order. Yes, turning down the heat under the foreclosure pressure cookers helps - but the second boot of regulation must fall first to direct restructuring, which will not bolster confidence if administered on an ad hoc basis.

The Congressional hearings are the better second step, and they need to progress quickly and lead to a regulatory framework that shows we know what went wrong and how to fix it so that it won't happen again.