Amid the Market Turmoil, Hope for Countrywide Homeowners
While the stock market on Monday was doing its Halloween thing and spooking all of us, Bank of America, proud new owner of Countrywide, announced that it has agreed to a nationwide mortgage-workout program to settle allegations of mortgage fraud, according to this L.A. Times story.
In a pact that could save mortgage holders billions of dollars, Countrywide owner Bank of America Corp. has agreed to the nation’s largest loan-modification program to settle charges of lending abuse brought by California and other states.
The program could reduce payments to Countrywide borrowers and provide other benefits to total as much as $8.7 billion nationwide. It would examine nearly 400,000 loans across the nation — about 125,000 of them in California — to see how they could be reworked and made more affordable. That could include switching customers to fixed-rate loans or reducing the interest or principal.
It remains to be seen how many homeowners will actually be helped by this. If they paid too much for the house to begin with, switching to a fixed-rate loan probably won’t help. Fixed-rate loans have higher payments than interest-only and adjustable loans, after all.
Furthermore, how many homeowners will want to keep making payments on properties that have declined in value up to 50 percent?
Officials acknowledged that some borrowers were beyond help and said these customers would need the cooperation of investors who owned the loans. Such assistance was not always forthcoming in the past.
Nonetheless, it’s good to see that Bank of America, sponsor of Major League Baseball, is quickly stepping up to the plate.
The agreement almost certainly would rank as the largest predatory-lending settlement in history, dwarfing the nationwide $484-million settlement with Household Finance Corp. in 2002 and a $325-million settlement with Ameriquest Mortgage Co. in 2006.
Gee. Remember when we all thought Countrywide was just a really successful, decent mortgage company?
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