Thursday, November 13, 2008

11 States Reach Settlement Agreement With Countrywide

Mortgage lender Countrywide Financial Corporation has agreed to provide approximately $8 billion in home loan and foreclosure relief to as many as 397,000 homeowners across the country including more than 1,000 in Kansas, Attorney General Steve Six said Thursday. Along with Kansas, attorneys general in Arizona, California, Connecticut, Florida, Illinois, Iowa, Michigan, North Carolina, Ohio, Texas and Washington are participating in the agreement with Countrywide.

The eleven states including Kansas reached the agreement with Bank of America, which acquired Countrywide in July of 2008. The agreement is expected to provide $16 million in reduced mortgage payments to more than 1,000 Kansas borrowers.

“Thousands of Kansans who are struggling to pay their mortgages and keep their homes will get immediate relief thanks to this agreement,” Six said. “I hope this agreement can serve as a catalyst to push other lenders and the federal government to immediately help homeowners on the verge of foreclosure.”

Under the settlement, Countrywide has agreed to modify loans for eligible borrowers so they will be better able to afford to keep their homes.

Modifications may include an automatic freeze or reduction in interest rates, conversion to fixed-rate loans, and refinancing or reduction of the principal owed. Under the modifications, first-year payments of principal, interest, taxes and insurance will be targeted to approximately 34 percent of the borrower’s income.

Countrywide has also agreed to stop making problematic high-cost mortgages and payment option adjustable rate mortgages.

In addition, Bank of America and Countrywide will pay $150 million in foreclosure relief payments to participating states to help consumers who have already lost their home due to predatory lending. Bank of America and Countrywide will also pay up to $70 million for relocation assistance to borrowers unable to stay in their homes, and will waive up to $60-$80 million in prepayment penalties and default fees.

Six says that 211 Kansans who were the victim of predatory lending have already been identified and are eligible to receive foreclosure relief payments as a result. These payments are in addition to other Kansans who will qualify for loan modification and other assistance.

The settlement resolves allegations that Countrywide used unconscionable and deceptive acts and practices in making and servicing home loans. As a result, homeowners were often stuck with unfair loans they couldn’t afford.

Countrywide, the largest provider of subprime mortgages in the United States, is expected to start the loan modification program on December 1, 2008. The company has said that it will reach out to eligible customers by hiring 3,900 new employees to administer the program. Countrywide has also said that it will halt foreclosure proceedings against homeowners who are likely to qualify for loan modifications under the agreement.

Countrywide customers can call 1(800) 669-6607 toll-free after December 1, 2008 for more information or visit the company’s website at http://www.countrywide.com.

Kansans who are facing foreclosures and who are not Countrywide borrowers can get free help by calling the HOPE Now Hotline toll-free at 1(888) 995-HOPE 24 hours a day, seven days a week.

According to RealtyTrac, foreclosures in Kansas are up 30.7% from one year ago. There were at least 656 new foreclosures in Kansas in October. Kansas is ranked 33rd in the nation for the number of foreclosures in 2008.

“The foreclosure problem continues to hurt Kansas families,” Six said. “It’s in all of our interest to help homeowners find a way to stay in their home.”

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