Countrywide loan modification 'a landmark model'?

Legal News Line Feb. 27, 2009, 1:31pm

SACRAMENTO, Calif. (Legal Newsline)-As the first 90 days of Bank of America's new loan modification program draws to a close in California, the attorney general's office said the program has already helped thousands to keep their homes.

But critics, most notably, The Greenlining Institute, remain highly critical of California Attorney General Jerry Brown for the settlement he struck with Bank of America over the predatory loan practices of Countrywide Financial Co., which Bank of America bought in July.

Scott Gerber, spokesman for the attorney general's office, said in an interview with Legal Newsline on Wednesday that the program established by the settlement between California and Bank of America has produced immediate results.

"The modifications are working," Gerber said. "Thousands of modifications are getting made every month, and that's just in California."

Deputy Attorney General Benjamin Diehl said California's settlement with Bank of America, which established the loan modification program, is identical to those signed since by several other states.

"This was a landmark model for a settlement." Diehl said. "Here, we're actually implementing a model designed to, and in fact succeeding in keeping people in their homes through loan modifications. It's cutting edge, innovative and effective. It's a truly new model."

Bank of America spokesman Dan Frahm told Legal Newsline on Tuesday that the Countrywide National Homeownership Retention Program launched as planned.

The program, Frahm said, provides "proactive outreach offering streamlining modifications to eligible borrowers with subprime and Pay Option adjustable rate mortgages."

But just how many people are eligible and benefiting is the crux of the complaint lobbed by Gnaizda, who criticized Brown for refusing to release data to the public.

"No matter what Jerry Brown says, until he is transparent with the data, you have to assume its all political propaganda," Gnaizda said. "We've asked for 30-day reports. He won't provide the data. When a public figure in a time of crisis won't make available data on his successes, you can be sure it's not going well."

Diehl and Frahm said the terms of the settlement require Bank of America to provide reports to the attorney general's office every 90 days, the first of which is not yet due. At that time, Diehl said, the attorney general will release what parts of the report are not determined confidential according to the terms of the settlement.
"The attorney general will be closely monitoring the compliance of the settlement," Diehl said. "But, by virtue of the effect that we have thousands of modifications already made, the public value is already apparent."

With the housing market in California at such a crisis point - nearly one-third of all foreclosure filings in the country occur in California, according to recent data - Gnaizda said public disclosure takes priority over protecting Bank of America. He believes the settlement should have required public accountability before agreed to by Brown.

Diehl said the terms of the settlement provide sufficient information to monitor the progress being made by the bank, including information about loan modifications that are made as well as reasons why some modifications aren't, he said.

Frahm said the program is proving to be a success.

"I think the basic design of the program and it's foundation in the affordability criteria has proven to be a success," he said, describing it as a "win/win for both the borrower and the investor."

Frahm said any disclosure of actual data on the program, particularly prior to sending a report to the attorney general's office, would be inappropriate.

Gnaizda remains unconvinced.

"If I were grading them," Gnaizda said, "I'd give the attorney general an F and Bank of America a C-minus."

Gerber said Gnaizda's comments were a "smokescreen" for his dissatisfaction with the original terms of the deal.

"Mr. Gnaizda's claims simply have no basis in reality," Gerber said. "It if were up to him we wouldn't have a settlement today, and thousands wouldn't still be in their homes."

Last fall, Gnaizda pushed for Brown to force Bank of America to admit fraud, which he believed would give the state legal clout to force security investors to agree to wide-spread loan modifications. Gnaizda said late last year that without such an admission, the investors will continue to block loan modification efforts by the banks.

Gnaizda filed such complaints with the judge who approved the settlement last year.

The Greenlining Institute will takes it concerns about the foreclosure crisis back to Washington, D.C. in March for three days of meetings with senior members of Congress and cabinet-level members of the Obama administration. Late last year, Gnaizda met with Congressional leaders regarding the need for a national moratorium on foreclosures. He wants to see a six-month moratorium enacted at the federal level, he said.

California adapted its own 90-day moratorium on foreclosures last week when Gov. Arnold Schwarzenegger signed into law the California Foreclosure Prevention Act authored by Democratic state Assemblyman Ted Lieu, D-Torrance.

Lieu, who said he will run for attorney general in 2010 if Brown opts to run for governor rather than seek re-election as expected, will join Gnaizda in Washington in March to meet with the Obama administration.

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