BofA Settles Countrywide Lawsuits with $8.4B Loan Modification Program
Friday, October 10, 2008
Bank of America today announced the creation of a home retention program to modify troubled mortgages for nearly 400,000 Countrywide customers nationwide. The program, which represents one of the largest predatory lending settlements in the United States, will provide up to $8.4 billion in interest rate and principal reductions for Countrywide borrowers who financed their homes with subprime or pay option adjustable rate mortgages (ARMs).
Since Bank of America acquired Countrywide in July of this year, attorneys general from a number of states have filed lawsuits against Countrywide, alleging the bank used abusive and deceptive mortgage lending practices. Bank of America developed the Countrywide loan modification program with attorneys general in California, Illinois, and nine other states as part of a blanket settlement. In addition, the bank said states that have not yet become participants in this program will be given an opportunity to do so.
“We are confident that together with the Attorneys General we have developed a comprehensive program that provides more solutions than ever before to assist troubled borrowers and put them back on the path to sustained homeownership,” said Barbara Desoer, president, Bank of America Mortgage, Home Equity and Insurance Services.
The new program applies to Countrywide mortgages originated prior to December 31, 2007, and is slated to begin by December of this year. At that time, Bank of America said its mortgage servicing team will begin proactive outreach to eligible customers. Until then, foreclosure sales will not be initiated or advanced for borrowers likely to qualify for the program, the bank said in a press statement.
Bank of America said it expects the initiative “to achieve affordable and sustainable mortgage payments for borrowers” who are “seriously delinquent or are likely to become seriously delinquent as a result of loan features, such as rate resets or payment recasts.”
In addition to loan modifications that include principal and interest rate reductions, as well as refinancing through the Federal Housing Authority under the HOPE for Homeowners program, Bank of America said it would give $150 million to Countrywide servicing customers who have already fallen victim to foreclosure and another $70 million in financial assistance to those now facing imminent foreclosure.
Commenting on the program, Joe Price, Bank of America's CFO, said, “By taking projected foreclosure losses and instead directing those funds into these proactive foreclosure prevention efforts, we create a solution in the best interests of both our customers and the investors whose loans and securities we service. Of the eligible loans, about 12 percent are now held by Bank of America. The cost of restructuring these loans is within the range of losses we estimated when we acquired Countrywide.”
The Wall Street Journal reported the program will be shared by Bank of America and investors who own securities composed of mortgages originated by Countrywide or by third parties who sold those loans to Countrywide.
To learn more about Bank of America's loan modification initiative, click here.
Since Bank of America acquired Countrywide in July of this year, attorneys general from a number of states have filed lawsuits against Countrywide, alleging the bank used abusive and deceptive mortgage lending practices. Bank of America developed the Countrywide loan modification program with attorneys general in California, Illinois, and nine other states as part of a blanket settlement. In addition, the bank said states that have not yet become participants in this program will be given an opportunity to do so.
“We are confident that together with the Attorneys General we have developed a comprehensive program that provides more solutions than ever before to assist troubled borrowers and put them back on the path to sustained homeownership,” said Barbara Desoer, president, Bank of America Mortgage, Home Equity and Insurance Services.
The new program applies to Countrywide mortgages originated prior to December 31, 2007, and is slated to begin by December of this year. At that time, Bank of America said its mortgage servicing team will begin proactive outreach to eligible customers. Until then, foreclosure sales will not be initiated or advanced for borrowers likely to qualify for the program, the bank said in a press statement.
Bank of America said it expects the initiative “to achieve affordable and sustainable mortgage payments for borrowers” who are “seriously delinquent or are likely to become seriously delinquent as a result of loan features, such as rate resets or payment recasts.”
In addition to loan modifications that include principal and interest rate reductions, as well as refinancing through the Federal Housing Authority under the HOPE for Homeowners program, Bank of America said it would give $150 million to Countrywide servicing customers who have already fallen victim to foreclosure and another $70 million in financial assistance to those now facing imminent foreclosure.
Commenting on the program, Joe Price, Bank of America's CFO, said, “By taking projected foreclosure losses and instead directing those funds into these proactive foreclosure prevention efforts, we create a solution in the best interests of both our customers and the investors whose loans and securities we service. Of the eligible loans, about 12 percent are now held by Bank of America. The cost of restructuring these loans is within the range of losses we estimated when we acquired Countrywide.”
The Wall Street Journal reported the program will be shared by Bank of America and investors who own securities composed of mortgages originated by Countrywide or by third parties who sold those loans to Countrywide.
To learn more about Bank of America's loan modification initiative, click here.
