Jerry Brown (D)
CHARLOTTE, N.C. (Legal Newsline)-Bank of America has created a proactive home retention program as part of its settlement with 11 state attorneys general over the predatory lending practices of Countrywide Financial Corp, the company said Monday.
Bank of America, parent company of Countrywide, said the program will "systematically modify troubled mortgages with up to $8.4 billion in interest rate and principal reductions for nearly 400,000 Countrywide Financial Corporation customers nationwide."
The program is part of the deal negotiated with California Attorney General Jerry Brown and Illinois Attorney General Lisa Madigan, the first two of numerous attorneys general to file suit against Countrywide.
"With this settlement, homeowners will receive direct relief from the catastrophic damage caused by Countrywide," Brown said. "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 lawsuits alleged that Countrywide intentionally sold customers risky and expensive loans, knowing that the mortgage payments would likely become unaffordable over the court of the loan.
"We are confident that together with the Attorneys General we have developed 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," said Barbara Desoer, president, Bank of America Mortgage, Home Equity and Insurance Services.
Bank of America said Countrywide will serve eligible borrowers who financed their homes with subprime or pay-option adjustable rate mortgages serviced by Countrywide from 2004 to the end of 2007. The program will begin on Dec. 1.
Bank of America officially acquired Countrywide on July 1.
"Since acquiring Countrywide in July," Desoer said, "we have committed significant resources and developed innovative programs to help as many Countrywide customers as possible stay in their homes."
While Monday's settlements applied to most states that have already brought suit against Countrywide, it does not include every state. For instance, West Virginia, which sued Countrywide last month has not yet agreed to the terms of the settlement.
"We are hopeful other states, including West Virginia, will participate in this agreement," Dan Frahm, a spokesman for Bank of America told Legal Newsline on Monday."
Frahm said Friday's $700 billion financial rescue plan, signed by President George W. Bush does not yet directly impact this settlement.
"Bank of America strongly supports the efforts by Congress and the Treasury to ensure the continued flow of credit to large and small businesses and consumers," Frahm said. "To the extent Federal Government programs acquire any of the mortgages eligible under this program and offer greater benefits to borrowers, those relief measures will be pursued for borrowers to the full extent."
San Diego City Attorney Mike Aguirre, who also sued Countrywide, said the settlement is a huge victory for beleaguered homeowners.
"This is definitely a home run," he told Legal Newsline on Sunday night.