Countrywide Rethinking On Avoiding Foreclosures and Opting For Modification

March 3rd, 2009

Countrywide is rethinking issues. To avoid foreclosures it is now opting for modification. It is now initiating its biggest modification of house loans operations in Texas and another 10 other states.

Countrywide is the biggest lender and loan servicer in USA. The Bank of America has recently acquired it. Legal suits have been brought against Countrywide by many states accusing it of predatory lending. To come to terms with these suits, Countrywide will give $8.4 billion directly for loan relief. It will benefit 400,000 borrowers across the country. Certain categories of fees will be waived and an additional sum will be set aside for those who are modifying their loans.

Jerry Brown, the Attorney General of California did not mince words when he bluntly said, ‘Countrywide’s greed turned the American dream into a nightmare for thousands.” Brown headed the negotiation talks for the states together with Lisa Madigan, the Attorney General of Illinois. He explained that their primary aim was to see that people stayed in their houses and also that those who have been ousted get some compensation. The details of how many foreclosure victims will benefit in Texas were unavailable.

Countrywide came to a settlement with the states without admitted their wrongdoings. As per the settlement Countrywide will bring down the amount of the principal in some instances and reduce the interest in others. The rates could fall by 2.5%. The deciding factor will be the capability of the borrower to repay. This interest will be status quo for another five years.

Hitherto Countrywide had promised to modify big number of loans, promising to help 82,000 sufferers who were facing imposition of increased interest rates in 2008. The new move by Countrywide is mandatory and state officials will oversee progress. About $79 worth of late fees will be forgiven and pre-payment penalties to the tune of $56 million waived for delinquent borrowers saddled with high foreclosure risk. A fund of $150 million from Countrywide will help the borrowers who are four months overdue in their mortgage payments or those already notified of foreclosure proceedings. Another $70 million will help the foreclosed victims to shift to rented accommodation. A total of $8.7 billion has been set aside by Countrywide to help foreclosure victims.

James E. Mahoney of Bank of America said that the cost of these operations had already been taken into account when the bank took over Countrywide.