Bank of America offers Countrywide borrowers some help
Posted October 6, 2008 12:02 a.m. EDT
Updated October 6, 2008 6:54 p.m. EDT
Charlotte, N.C. — Facing a lawsuit over deceptive mortgage practices, Bank of America Corp. agreed Monday to pay more than $8 billion to modify hundreds of thousands of loans to keep people from losing their homes.
Charlotte-based Bank of America pledged to offer 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.
Eleven states, including North Carolina, reached the agreement Friday with the bank. More than 5,000 North Carolina borrowers could see their mortgage payments reduced.
Some borrowers might qualify 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.
"Thousands of North Carolinians who are struggling to pay their mortgages and keep their homes will get relief thanks to this agreement," North Carolina Attorney General Roy Cooper said in a statement Monday. "Other mortgage companies need to step up to the plate with similar plans to help homeowners facing foreclosure."
Arizona, Connecticut, Florida, Iowa, Michigan, Ohio, Texas and Washington also joined in the settlement after Illinois and California sued earlier this year.
Other states could sign on, said Deborah Hagan, chief of the Illinois Attorney General's Consumer Protection Division.
Bank of America said it will launch the new mortgage aid program in December and will halt foreclosure proceedings against homeowners who are likely to qualify for the loan modifications.
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 losing equity under some payment plans.
Countrywide will not charge loan-modification fees and will waive prepayment penalties.
Illinois Attorney General Lisa Madigan said she hopes the settlement could serve as a model for other lenders 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," she said.
The settlement resolves allegations that Countrywide, the largest provider of subprime mortgages in the nation, used unfair and deceptive tactics in making and servicing home loans. As a result, homeowners were often stuck with unfair loans they could not afford.
Countrywide customers can call 800-669-6607 toll-free for more information or visit the company’s Web site at www.mycountrywide.com.
North Carolinians facing foreclosure who are not Countrywide borrowers can get free help by calling the HOPE Hotline toll-free at 888-995-HOPE.
“Families are hurting and they need help,” Cooper said. “It’s in all of our interest to help homeowners find a way out of foreclosure when possible.”