Countrywide Lawsuit Settled – Lender to Modify Mortgages In 11 States


Published: October 5, 2008
Countrywide Financial has agreed to the largest program ever to modify home loans, as part of a settlement with officials in 11 states, just days after the federal government adopted a giant financial rescue package without any relief for distressed homeowners.

Countrywide, the nation’s largest lender and loan servicer, recently acquired by Bank of America, had been sued by the states over what they said were predatory lending practices. To settle the suits, it will provide $8.4 billion in direct loan relief, affecting an estimated 400,000 borrowers nationwide, while waiving certain fees and setting aside additional funds to help people in foreclosure and relocating.

“Countrywide’s greed turned the American dream into a nightmare for thousands of Californians who now face foreclosure,” said Jerry Brown, the attorney general of California. He led the negotiations for the states with Lisa Madigan, the Illinois attorney general. “Our goal here is to help as many people stay in their homes as possible and get some compensation for those who have already been pushed out of their homes,” he said.

Mr. Brown expects loans worth $3.4 billion to be modified in California, where homeowners have been hit hard in the housing bust.

The Countrywide effort is the most comprehensive, mandatory loan workout program since the mortgage crisis began last year. Congress has proposed various programs, but those measures did not make it into the final $700 billion government bailout. Since taking control of Fannie and Freddie Mac, the two housing giants, the Federal Housing Finance Agency has said it is looking at expanding modifications on the loans that Fannie and Freddie own or guarantee.

After seizing IndyMac, the Federal Deposit Insurance Corporation began a loan modification program that it said could be a template in other takeovers. The agency hopes to help tens of thousands of borrowers whose interest rates are being reset higher in the early stages of that program.

It is encouraging people who have fallen severely behind on their payments or who have defaulted to switch into a fixed-rate mortgage at current rates of about 6 percent. Countrywide has made pledges before to modify large swaths of loans. Late last year, it vowed to help about 82,000 borrowers who were facing higher payments through 2008. But the new program will be mandatory and will be monitored by state officials.

Along with the direct relief, Countrywide 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.

A Bank of America spokesman, James E. Mahoney, said that the cost of the program had been anticipated by the company in its acquisition of Countrywide.

“We have worked with attorneys general across the country to resolve the issues relating to Countrywide’s practices,” Mr. Mahoney said. “Bank of America has put our own leadership in charge of Countrywide and have committed to a very different set of business practices going forward.”

Countrywide settled with the states without admitting any wrongdoing.

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.

The program will focus on borrowers who were placed in the riskiest loans, including adjustable-rate mortgages whose interest rates reset significantly several years after the loans were made. Pay-option mortgages, under which a borrower must pay only a small fraction of the interest and principal, thereby allowing the loan balance to increase, are also included in the modifications.

Borrowers whose first payment was due between Jan. 1, 2004, and Dec. 31, 2007, can participate. The loan balance must be at least 75 percent of the current value of the home, and the borrower must be able to afford the adjusted monthly payments.

“We have created the first comprehensive, mandatory loan-modification program with the largest loan servicer in the country, and it is going to help homeowners stay in their homes,” Ms. Madigan said. “We will use this model when we work with other servicers as well.” She said that approximately $185 million worth of loans in Illinois would be modified under the settlement.

Illinois had accused Countrywide of relaxing underwriting standards, structuring loans with risky features, and misleading consumers with hidden fees and fake marketing claims, like its “no closing costs loan.” Countrywide also created incentives for its employees and brokers to sell questionable loans by paying them more on such sales, the complaint said. In reviewing one Illinois mortgage broker’s sales of Countrywide loans, the complaint said the “vast majority of the loans had inflated income, almost all without the borrower’s knowledge.”

Other states in the settlement are Arizona, Connecticut, Florida, Iowa, Michigan, North Carolina, Ohio, Texas and Washington. It is the largest predatory lending settlement in history, far exceeding the $484 million deal struck in 2002 with the Household Finance Corporation.

“This agreement demonstrates the effectiveness of states in addressing predatory lending and other consumer protection matters, proving states should not be pre-empted by federal legislation,” said Mr. Brown.

The program will be administered by state officials who will examine regular reports from Bank of America. The program will begin Dec. 1 as Bank of America contacts borrowers. In the meantime, Bank of America said Countrywide customers can call 800-669-6607 to discuss their loans.

The terms of the settlement do not address Angelo R. Mozilo, the former chief executive of Countrywide Financial, or David E. Sambol, the company’s former president. The states had included both as defendants. Mr. Brown said he would pursue litigation against both men. Neither could be reached for comment.

15 Responses

  1. We have an interest only loan with countrywide but we are current and have never been late. We would like to convert to a fixed rate before our term is up , is there a way we can refinance without having to pay the fees to do so?

  2. In response to this post Id like to say the following. I am a loan officer currently working on a reverse mortgage for a borrower who has his loan with countrywide, a pick a pay as a matter of fact. We as a result of the neg am they are short on the appraisal vs the value, 50,000 to be exact of which the borrower is willing to bring 15,000 to closing. When I called countrywide to negotiate the remaining 35,000 they blatantly said no, they dont do that. They will accept a short sale, but they wont accept a short refinance payoff. Can someone please tell me where the logic is in that. Duh isnt the idea to keep the homeowner in their home… or is it more profitable to sell the house to some stranger for maybe 50% less than to accept maybe a 10% loss and keep the current owner there?

    So, how much longer is Countrywide going to be ripping people off?

  3. I offer the following for your consideration:

    The same Countrywide that gave VIP loans?

    ” 14 Aug 2008 // After being stonewalled for nearly a month, Rep. Darrell Issa (R-CA) and Rep. Mark Souder (R-IN) have sent an official request for an Ethics Committee investigation into “disturbing allegations,” first reported in Conde Nast Portfolio, that Countrywide Financial gave illegal mortgages prohibited by House rules to members of Congress, congressional staff and other officials.

    Sweetheart mortgages given by Countrywide Financial, then the nation’s biggest mortgage lender, to elected officials and government bureaucrats seem tailor-made for an ethics inquiry by Congress, especially …. with the bailout …..

    Specifically, Countrywide’s sweetheart mortgages were called VIP loans, in which lawmakers and government employees allegedly received lower interest rates and point shaves on their mortgages. Countrywide’s controversial VIP mortgages were given under the “Friends of Angelo” program, nicknamed after Countrywide chief executive Angelo Mozilo, a story that first broke in Portfolio Magazine.

    The mortgages were allegedly given to Congressional members and staffers championing this record bailout, a bailout that … [now exceeds] …. the taxpayer cost of the S&L crisis in the late ‘80s and early ‘90s.

    But Rep. Darrell Issa (R-Calif.) and Rep. Mark Souder (R-Ind.) say Rep. Henry Waxman (D-Calif.), chairman of the House Committee on Oversight and Government Reform, is ignoring their demands for an investigation into cheap, VIP mortgages allegedly given by Countrywide Financial to House staff members and elected officials.

    Who Got the Sweetheart Deals?

    Countrywide allegedly gave cheap, sweetheart mortgage to Sen. Kent Conrad (D-ND) and Sen. Christopher Dodd (D-Conn.), chairman of the Senate Banking committee who reportedly saved $75,000 on his inside deals from Countrywide.

    Dodd, who has helped shepherd the housing bill, has received about $107,800 in campaign contributions-nearly 50% higher than initially thought-from Bank of America’s employees and political action committee, including the bank’s predecessor companies, since 1989, according to Douglas Weber, an analyst with the Center for Responsive Politics.

    Both senators have denied wrongdoing and both reportedly welcome a Senate ethics inquiry (to date, no Senate ethics hearings on the matter have been announced).

    Senate Budget Committee Chairman Conrad said he is donating $10,500 to charity and refinancing his loan on an apartment building after reviewing documents showing he received special treatment from Countrywide Financial Corp.

    Conrad said it appears that Countrywide waived 1 point on his mortgage for a Bethany Beach, Del., vacation home. He said he would donate the equivalent amount of money to Habitat for Humanity.

    The Wall Street Journal has also reported that James Johnson, a former chief executive of Fannie Mae, resigned recently as an adviser to the presidential campaign of Sen. Barack Obama after it was disclosed that Johnson received sweetheart loans from Countrywide. Johnson’s lawyer has said those loans were made on normal terms. Franklin Raines, a former head of Fannie Mae, also received sweetheart Countrywide loans, the Wall Street Journal reports.

    Rules on Illegal Gifts to Congressmen: House and Senate rules bar members from knowingly receiving gifts worth $100 or more annually from companies that use registered lobbyists. Countrywide’s ethics code restricts executives, employees and board directors from improperly trying to influence government employees with money, gifts, loans, rewards, favors or anything of value.

    High-level Footdragging on Hearings

    The congressmen’s complaint comes after two requests for an Oversight and Government Reform Committee investigation to chairman Henry Waxman came up short. Rep. Waxman punted on the hearing, passing the buck to the ethics committee.

    Friends of Countrywide Financial CEO Angelo Mozilo and other high-profile individuals had their home loans handled by the company’s VIP desk, where a team of loan officers would work out favorable terms in conjunction with Mozilo ……

    Senator Dodd reportedly received two loans in 2003 through the program, borrowing $506,000 and $275,042 to refinance homes in Washington and East Haddam, Connecticut. Countrywide waived $2,000 on the first loan and $700 on the second, according to Portfolio. Since 1997, Countrywide has contributed $21,000 to Dodd’s campaigns.

    Johnson, the former head of Fannie Mae, the organization that guarantees mortgages for millions of American homeowners, received loans worth more than $5 million from Countrywide at below-market rates, according to the Wall Street Journal. Among the loans were a $5 million home equity line of credit against a house in Ketchum, Idaho, a 3.875% loan of $971,650 for a home in Washington, D.C., and a 5.25% loan of $1.3 million for a home in Palm Desert, Calif.

    The brewing scandal surrounding VIP treatment hit the presidential campaign last week when James Johnson resigned from Senator Barack Obama’s vice presidential search committee after reports that he received favorable mortgage terms from Countrywide Financial. The loan figures were confirmed for by Johnson’s lawyer, Brian Brooks, who emphasized that Johnson “never asked for a special deal.”

    Johnson resigned from Fannie Mae in a controversy involving violation of accounting standards and bonuses raleted to sub-prime loans.

    The current head of Fannie Mae, Daniel H. Mudd, the son of veteran CBS newscaster Roger Mudd, also received two mortgage loans from Countrywide on his home in Washington, D.C.

  4. dd – As to your specific question – The Bailout was never intended to correct your Client’s (who you first refer to as a “borrower” rather than homeowner) bad investmant. You don’t mention “foreclosure” once, nor do you say your Client is “behind” or delinquent on their payments – Your issue – You Client’s house (you don’t refer to it at a primary residence) has lost value and the Client wants a redo- You describe the appraisal as being $50K short of value – the appraisal is the value – the home is $50K short of the value the customer wishes it had – I’m assuming your Client has “no equity” in the structure. Your Client has offerred $15,000 to eliminate $50K in debt. Why should the bank accept that compromise? The Bank must figure the property will recoup the value it has loss – your Client must feel likewise and is looking to capture that windfall. I don’t believe this is what Congress had in mind (assuming they had anything in mind) with the bailout – I doubt this is how the taxpayers wanted their money spent. Why doesn’t your Client use the $15,000 to bring the original agreement current?

  5. I have never missed a payment with Countrywide Home Loans. However Since I refinanced with them in Jan of this year. I have had to live off CC to make my house payment.. Now I have Maxed Out all my Cards and Cannot make the Dec Payment. I know they loaned me more that the 35% allowed by law. They won’t help now! They say I have to miss 3 payments before they will help. I’ve been told there may be Class Action Lawsuit against them. If anyone knows where I can go, I could use the ideas. I have allready filed a complaint against them with The BBB and The State Attorney General.

    • If they loaned you 35% more than allowable by law I am sure you mean now with the plumiting real estate market as it is going now. Don’t feel bad but beware of any company that thinks they can re-negotiate your laon for you. If they ask for money to do so they are scams…. Like 21st Century is a scam. They took my fiance’s money and ran. Baited and switched on him. I they never did anything they promised they’d do. Countrywide doesn’t even recognize them as authorized to speak on his behalf. BEWARE OF 21st CENTURY PLEASE…. EVERYONE…. IF YOUR SITUATION IS BAD THEY WILL MAKE IT WORSE. They said they might give me a refund, that is after they heard that I reported them to the attorney general’s office but it’s been over a week and I still haven’t heard from them again. I honestly don’t think they will follow through. In case they do I promise to let you know. they made off with nearly 3 months mortgage per month as closing costs to renegotiate with countrywide off a disabled man on a fixed income. FOR SHAME!!!!!!!!!!!

  6. Try Bankruptcy – then live within your means. You would have missed lots of payments had you not used your credit cards or borrowed not 35% as you describe but more than 135% of the value of your home.

    You were not making payments on your home, or paying down your debt, your were just switching the debt to another source. Now you want to switch the debt to me …… NO THANKS – YOU CAN KEEP IT YOURSELF.

  7. I bought a house in 2000 with the “help” of Countrywide. When I was approved it was at a rate of 6 .75 percent when I signed all the paper work I ended up with a rate of 9.25 percent after being told the rate of 6.75 was locked in . I lost the house due to the high payments in 2004 I could not find one person to even suggest some form of help , talking to Countrywide got me no where. I hope justice is served to these heartless thieves.

    FROM: McAuleys’s World – Why did you ever sign a note at 9.25%? Why isn’t the former Head of Countrywide not in Prison. How did Democratic Senator Chris Dodd get re-elected. Why is he not in Jail (For requesting and accepting sweetheart loans from Countrywide. Why is Rep Barney Frank not in Jail? Why do people continue to re-elect him after his famous “There is nothing wrong with how Fannie Mae and Freddie Mac are doing business” – his buddies were running Fannie and Freddie and fleecing the American Public while he was accepting their campaign cash. Guardians of ther middle class my ass ………..

  8. We were in the process of a loan modification and were under the impresstion the modification was completed because when we log online it says and I have a copy of it your workout has been approved and is in the final stages of completetion. Then after making two payments in accordance with the new loan modification I receive a letter in the mail stating their intent to foreclose on our home by July 4th if we don’t come up with the outstanding balance from the months we were behind. I called now Bank of America thinking it was a mistake and they said my modification was denied because I failed to turn in proper documentation. They said they needed my husbands pay stubs well I again explained to them I turned in our bank statements because he gets a 1099 and not a pay stub. The girl said I only turned in one statement and I said no, look again..we bank online the “one” statement reflects 3 months of banking. She still made us start all over with the modification and now we’re not even sure if it will get approved, even though nothing has changed. I just don’t understand because I talked to them numerous times on the phone and not one time did someone bother to tell me they were missing documents. I want to keep my home and the only reason we are in this mess in the first place is because my husband’s income was reduced by half and we were struggling to make our payments.

  9. Does the law suit against Country Wide allow them or Bank of America to put a judgement against an owner who was foreclosed on, if the house is sold for less than the loan? My loan was through Country Wide and is now through Bank of America. Short sales have been submitted and the bank has not accepted or turned them down. It is in the early stages of foreclosure.

  10. I got a countrywide home loan (v.a.) on september of 2006. The finance rates were exorbitant then and also we have had a change of finances within the family which makes my home loan very difficult to keep up with now. Currently, I am over 3 months late on my mortgage payments. I paid a company from orange, california to do a home loan modification with bank of america…Bank of america seems to be stalling the company I hired as long as they can. My original loan which I am behind on is at %7.00 interest rate 30 yr. fixed v.a. with about %7.150 a.p.r.. I did a thorough background check on the company I hired to do the modification and they were referred to me from a federal government website. Why is bank of america taking so long to approve a lower interest rate. After all, with the lawsuit lost by countrywide at $8.4 billion, bank of america will be getting my mortgage payments plus incentive money from the fine against countrywide. This is unnacceptable. I went to vietnam when my country sent me, even though I was against the war. All I am asking is for a lower interest rate. It appears that bank of america has become very greedy, at least in my circumstances.

  11. I was in a class act law suit against Countrywide(Michigan) and was supposed to receive a check late in Jan.2010. I cannot find a contact person or address if anyone has information on this please contact me. Thank You, Rosemarie

    Countrywide Home Loans forced me out of my home when I became disabled and was unable to work. I tried to sell my home under the forebearance rule with a very qualified buyer who was able to qualify without putting down payment. So under the direction of the Loan Office of Countrywide he was purchasing my home under the “NO DOWN PAYMENT” and “NO CLOSING COST” program. So when it was time to close the loan then they came up with surprise closing cost blew the whole deal off the table. The buyer could not believe what had happend. In the meantime my Disability came through and I ask Countrywide if I could get my loan rewritten they took so long to get back with me until I was afraid that my home would be sold on the Sheriffs Sale and I would be homeless and disabled. That was my primary dwelling and I thought they should have been able to keep my home under those circumstances. Please tell me what to do to seek compensation from this Countrywide Home Loans. I need answers they lied and forced me out of the only home I had.

  13. Countrywide ripped us off in a refinance. And promised too. Modify us and didn’t. Bank of America is no different.

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