Borrowers who received loans from Countrywide, a mortgagor with a branch in Rutherford, and are facing foreclosure could be eligible for a break thanks to the Nationwide Homeownership Retention Program by Bank of America, Countrywide’s owner. The program is the first bulk mortgage modification from the private sector and has stirred interest from legislators in Washington, D.C.
Bank of America, which recently bought out Countrywide, said the program would reduce troubled mortgages by a total of $8.4 billion for 400,000 customers. The program was developed with help from state attorneys general and was designed for borrowers who financed their homes with subprime loans or adjustable rate mortgages served by Countrywide prior to Dec. 1, 2007. Bank of America acquired Countrywide on July 1, but Countrywide continues to retain its brand.
"Since acquiring Countrywide in July, we have committed significant resources and developed innovative programs to help as many Countrywide customers as possible stay in their homes," said Barbara Desoer, president of Bank of America Mortgage, Home Equity and Insurance Services.
Some have suggested that this program rewards bad behavior. Those who have not been late on making mortgage payments are not eligible for the plan.
Still, the idea is catching on. The congressional House Financial Services Committee caught wind of the idea and committee chairman Barney Frank of Massachusetts wrote a letter to 10 bank CEOs urging them to take on similar plans for large-scale loan modifications. "We need for private industry to come through and do the right thing," said Steve Adamske, spokesman for the House Financial Services Committee. "They now have a responsibility."
While supportive of their plan, the House Financial Services Committee certainly recognizes Countrywide shares a portion of the blame for the current national financial crisis. In fact, the committee was one of the government entities to call on Angelo Mozilo, former CEO and chairman of Countrywide, to give back money from the housing bubble he helped create, added Adamske.
The motives for Countrywide to offer this program may appear altruistic, but Frank’s letter points out that it was done to settle claims of predatory lending brought by various states. Lenders also have an incentive to settle or work out loans. The cost of foreclosing on a house is often not worth the benefits of a repossession sale, according to Adamske.
Beginning Dec. 1, 2008, Countrywide will contact borrowers whose loans are scheduled for an interest rate change. The mortgagor will then put a stop to foreclosures for eligible borrowers until it determines the borrower’s interest in staying in the home and ability to afford new terms. It will also waive late fees for missed payments and penalties connected to refinancing or loan workouts, even if the new loan is not with Countrywide.
In order to be eligible, the borrower must have received a subprime or adjustable rate mortgage prior to Dec. 31, 2007 and own an owner-occupied one-to-four unit home. Subprime fixed and adjustable rate borrowers can reduce their interest to as low as 2.5 percent.
In addition to modifying mortgages, Countrywide is working with various state attorneys general to implement a program to keep people in their homes who are facing foreclosure. So far, 14 states have signed on to the program, but New Jersey has not at this point.
The program will give cash assistance to foreclosed homeowners who voluntarily leave their property and give relief to homeowners in danger of foreclosure. The criteria for this assistance will be determined by each state.
