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Countrywide Financial will compensate Florida homeowners

POSTED 10/07/2008 - Under a settlement with the state attorney general’s office, Countrywide Financial will compensate Florida homeowners with up to $1 billion in foreclosure relief payment program and loan modifications.

The relief will include loan modifications for an estimated 57,000 Floridians who could see their principal and interest rates reduced to more affordable terms and cash payments to some borrowers who lost their homes through predatory practices by the company.

Attorney General Bill McCollum announced Monday that Florida and several other states have reached a multimillion dollar agreement in principle with Countrywide, now a newly-acquired subsidiary of Bank of America.

"This agreement will bring much-needed relief to countless homeowners, including thousands in Florida," said Attorney General McCollum. "I appreciate Bank of America’s commitment to rectify the situations created by Countrywide’s loan practices."

The agreement, which is still being finalized by the participating states, could provide nearly $1 billion in total relief to Florida homeowners alone and up to $8 billion nationwide, including the realized relief from modified loans. Under the terms of the agreement, the following relief initiatives will be offered:

Home Retention Efforts

Countrywide will launch a new Loan Modification Program for qualifying owner-occupied subprime home loans and pay option adjustable rate mortgages (ARMs) to move borrowers into fixed-rate, fully amortizing loans that they can afford. Additionally, Countrywide will suspend foreclosures on all loans that meet the eligibility criteria while determining whether or not the borrower qualifies for a loan modification, and will waive all loan modification fees associated with a modification under the new program. Approximately 52,000 Florida borrowers are anticipated to receive a loan modification under this plan.

Foreclosure Relief

Countrywide will make cash payments to eligible individual borrowers who have lost their homes to foreclosure after experiencing an early payment default or after an interest rate reset. Early payment default is an indicator that the loan was not underwritten properly and the homeowner could not afford the loan from the beginning, and default after reset is an indicator that a loan was not written to the fully-indexed, fully amortizing rate. Approximately $150 million will be available nationwide with more than $20 million earmarked for Florida borrowers.

Countrywide will also make approximately $60 million in cash payments nationwide to any borrowers in foreclosure who agree to voluntarily leave their home at the time of foreclosure sale. Florida borrowers in foreclosure could receive up to $4 million under the relocation assistance program.

Other Relief

Countrywide will waive late fees for the delinquency that led to borrowers receiving loan modifications under the new program. Approximately $79 million in late fees will be waived nationwide, and $9.7 million will be waived in Florida. Countrywide will also waive prepayment penalties on subprime and pay option ARM loans owned by Countrywide. Approximately $56 million in prepayment penalties will be waived nationwide, and $8 million will be waived in Florida.

Once finalized, the agreement will resolve the allegations against the Bank of America-owned subsidiary in a lawsuit filed by Attorney General McCollum prior to Countrywide’s acquisition. The lawsuit asserted Countrywide put borrowers into mortgages they couldn't afford or loans with rates and penalties that were misleading. The company’s deceptive marketing practices were purportedly designed to sell costly loans while hiding or misrepresenting the terms and dangers. Bank of America acquired the company the day after the lawsuit was filed and has worked with the Attorneys General to resolve the allegations against its subsidiary.

In addition to Florida, participating states currently include Arizona, California, Connecticut, Illinois, Iowa, Michigan, Ohio, Texas, and Washington. Additional states may join the agreement in the coming days. Consumers can call Countrywide toll-free at 1-800-669-6607 for additional information.