Mortgage lender Countrywide Financial Corp. has agreed to provide about $8 billion in home loan and foreclosure relief to as many as 397,000 homeowners across the country including more than 1,000 in Kansas, Attorney General Steve Six said Thursday.
Eleven states, including Kansas, reached the agreement with Bank of America, which acquired Countrywide in July of 2008. The agreement is expected to provide $16 million in reduced mortgage payments to more than 1,000 Kansas borrowers.
“Thousands of Kansans who are struggling to pay their mortgages and keep their homes will get immediate relief thanks to this agreement,” Six said. “I hope this agreement can serve as a catalyst to push other lenders and the federal government to immediately help homeowners on the verge of foreclosure.”
Under the settlement, Countrywide has agreed to modify loans for eligible borrowers so they will be better able to afford to keep their homes.
Modifications may include an automatic freeze or reduction in interest rates, conversion to fixed-rate loans, and refinancing or reduction of the principal owed. Under the modifications, first-year payments of principal, interest, taxes and insurance will be targeted to about 34 percent of the borrower’s income.
Countrywide also has agreed to stop making problematic high-cost mortgages and payment option adjustable rate mortgages.
In addition, Bank of America and Countrywide will pay $150 million in foreclosure relief payments to participating states to help consumers who have already lost their homes due to predatory lending. Bank of America and Countrywide also will pay up to $70 million for relocation assistance to borrowers unable to stay in their homes, and will waive up to $60 million to $80 million in prepayment penalties and default fees.
Six says that 211 Kansans who were the victims of predatory lending have already been identified and are eligible to receive foreclosure relief payments as a result. These payments are in addition to other Kansans who will qualify for loan modification and other assistance.
The settlement resolves allegations that Countrywide used unconscionable and deceptive acts and practices in making and servicing home loans. As a result, homeowners were often stuck with unfair loans they couldn’t afford.
Countrywide, the largest provider of subprime mortgages in the United States, is expected to start the loan modification program on Dec. 1. The company has said that it will reach out to eligible customers by hiring 3,900 new employees to administer the program. Countrywide also has said that it will halt foreclosure proceedings against homeowners who are likely to qualify for loan modifications under the agreement.
