Countrywide Financial Corp. has agreed to make loan modifications for about 395,000 U.S. mortgage holders and will pay $150 million into a foreclosure relief fund to settle predatory lending complaints filed by various states. The subprime lender, which was bought last year by Bank of America, also has agreed to restructure hundreds of millions of dollars of outstanding debt. While the total cost of the settlement is said to be about $8.5 billion, you must remember this comes from the company’s estimate.
It appears that in this settlement, Countrywide is trying to resolve all allegations that it used “unfair and deceptive practices” in its loan origination and servicing business. Borrowers were sold mortgage loans that were unaffordable, leading to increased defaults and foreclosures. The restructuring program will cover borrowers with subprime loans, including adjustable rate loans with initial “fixed” rates and pay-option adjustable rate mortgages. In addition to those practices, Countrywide will waive loan modification fees and drop prepayment penalties on subprime and pay option ARM loans.
In a similar move, Citigroup Inc. claims to have a plan in place that will help mortgage borrowers remain in their homes. The Citi Homeowner Assistance program supposedly would preemptively contact 500,000 mortgage holders — involving $20 billion of mortgage balances — to try to ensure that they can pay their loans. The focus is said to be on borrowers who live in areas that are likely to face “extreme economic distress.” Citi extended its moratorium on foreclosures, saying it won’t begin or complete a foreclosure sale on a home on which it owns the mortgage if the borrower wants to stay in the home, but it has to be the borrower’s principal residence. Citigroup said it expects about 130,000 borrowers to be involved.
I am not sure how these plans will work out. It would be very hard to implement such a program without government control and oversight. Hopefully, any states or other governmental entities entering into or approving these type settlements will perform their own due diligence and make sure the deals do what they purport to do.
Source: Associated Press
Contact us today for a free legal consultation with an experienced attorney.
Fields marked *may be required for submission.
If you would like to subscribe to the Jere Beasley Report digital edition, simply visit our Subscriptions page and provide the necessary information or call us at 800-898-2034.
Attorney Advertising - Prior results do not guarantee a similar outcome.