Mark Winston Griffith
Countrywide Settlement: A Model for Assisting the Forgotten Homeowner
Blame it on the" new economy". You know things are bad when the government devises a bailout bill that ignores the plight of homeowners facing foreclosure, and then the country's biggest mortgage lender announces a massive mortgage modification program.
Countrywide Financial, which was recently acquired by Bank of America and is regarded by many to be the corporate poster child for predatory lending, announced a settlement that would provide loan relief for 400,000 borrowers, virtually equaling what the federal government's own modification program is supposed to accomplish.
In what should be regarded as a model for how mortgage lenders should be compelled to fixed the mortgage crisis, Countrywide,
[a]long with the direct relief,...will waive late fees of $79 million and prepayment penalties of $56 million and suspend foreclosures on delinquent borrowers with the riskiest loans.
A foreclosure relief fund will be created with $150 million from Countrywide to help borrowers who are four months or more behind on their payments or whose homes have already been foreclosed on. The company will also provide $70 million to help troubled borrowers relocate to rental housing. In all, Countrywide is setting aside $8.7 billion to help borrowers.
...Under the terms of the settlement, Countrywide will reduce principal balances in some cases and cut interest rates in others. Rates could decline to 2.5 percent, depending upon a borrower’s ability to pay, and remain at that level for five years. Then the rate will adjust to prevailing interest rates charged by Fannie Mae on its fixed-rate mortgages.
What's significant about this program is that it reveals the culpability of lenders in the foreclosure crisis, as well as the responsibility they should assume in helping homeowners avoid foreclosure. Although Countrywide does not admit to any wrongdoing - standard practice in these types of agreements - investigations into Countrywide's practices revealed massive acts of underwriting and sales abuse, thus demonstrating how many lenders either manipulated or did not fully disclose the terms of their mortgages.