Jerry Brown (D)
SACRAMENTO, Calif. (Legal Newsline)--In the largest predatory lending settlement in U.S. history, Countrywide Financial Corp. has agreed to modify home loans for about 400,000 homebuyers as part of a settlement with 11 states.
The Calabasas, Calif.-based home lender was recently acquired by Bank of America, with headquarters in Charlotte, N.C.
Countrywide was sued by a handful of state attorneys general, who alleged that the lender engaged in predatory lending practices, including misrepresenting loan terms and borrowers' ability to afford loans.
To settle the claims, Countrywide has agreed to provide $8.68 billion in direct loan relief, which includes for $3.5 billion for struggling California homebuyers, under the deal to be announced Monday.
"With this settlement, homeowners will receive direct relief from the catastrophic damage caused by Countrywide," said California Attorney General Jerry Brown.
"Countrywide's lending practices turned the American dream into a nightmare for tens of thousands of families by putting them into loans they couldn't understand and ultimately couldn't afford," the Democrat added.
In settling the case, Countrywide has not admitted to any wrongdoing. Borrowers whose first payment was due between Jan. 1, 2004, and Dec. 31, 2007, can participate in the settlement. The program will begin Dec. 1.
Officials said the settlement will allow eligible subprime and pay-option mortgage borrowers to obtain a modified and more affordable loan.
The settlement, among other things, provides for the suspension of foreclosures for eligible borrowers with subprime and pay-option adjustable rate loans and a waiver of $135 million in various fees and penalties.
Participating in the multi-state settlement in addition to Brown are attorneys general in Arizona, Connecticut, Florida, Illinois, Iowa, Michigan, North Carolina, Ohio, Texas and Washington.
Brown said Bank of America has also agreed to suspend offering, under its own name or through Countrywide, subprime loans or loans that can negatively amortize.
"Unlike last week's congressional bailout, this loan modification program provides real relief for borrowers at risk of losing their homes," Brown said.
"Tragically, California and the other states have had to step in because federal authorities shamelessly failed to even minimally regulate mortgage lending," he added.
From Legal Newsline: Reach reporter Chris Rizo at chrisrizo@legalnewsline.com.