Attorney General Rob McKenna Monday announced a landmark settlement brokered by Washington and other states requiring sub-prime lender Countrywide Financial Corp. to provide loan modifications for up to 395,000 borrowers nationwide.
As a result, nearly 10,000 Washington homeowners will receive about $200 million in payment relief.
The settlement resolves allegations that Countrywide had used unfair and deceptive tactics in its loan-origination and servicing activities – and that borrowers often were put in structurally unfair and unaffordable loans. Countrywide is the largest provider of sub-prime mortgages in the U.S.
"Yesterday at Mt. Zion Baptist church, I heard Rev. Dr. Sam McKinney say that congress had recently bailed out Wall Street, with pennies for Main Street and nothing for your street," McKenna said. "That's why I'm happy to announce real relief for thousands of local homeowners on the brink of foreclosure — and for some who have already lost their homes."
Meanwhile, The Seattle Urban League holds the last of its "To Own and Keep Your Home" counseling events, helping homeowners make sure their assets are secure, Saturday, Oct. 11 from 10 a.m. to 3 p.m. at the WaMu Cedarbrook Leadership Center, 18525 36th Ave. S. near SeaTac.
Taylor says this Saturday's event will include one-on-one sessions with mortgage servicers from Countrywide, WaMu and Bank of America, who are coming up from California and Texas to do "workouts" – literally sitting down with clients and working out what they can do to keep their homes.
"These are folks that families wait on the phone for hours sometime to get in touch with that will be right in our own town," Taylor said. "This is a great opportunity for families — they have promised us a work out of some sort for every one."
But she said so far the event's sign up has been low. To reserve your free seat, which lunch provided, call Taylor at 1-800 368 1455
"If you've been a victim of fraud, we'll have people there from the Attorney General's office to take some of those complaints and help you facilitate a remedy," said A. Linda Taylor, Seattle Urban League housing director.
After months of negotiation, requiring several trips to Chicago, McKenna and attorneys general representing several states reached agreement with Bank of America late Friday. Bank of America acquired Countrywide Financial on July 1.
In the state of Washington, 42 percent of Countrywide's subprime hybrid ARMs, 11 percent of pay option ARMs, and 24 percent of largely fixed-rate subprime loans are delinquent.
Under the agreement, eligible borrowers will be able to modify the terms of their loans to make monthly payments more affordable. Modified loan terms will vary according to the circumstances of the borrower, but they may include an automatic freeze or reduction in interest rates, conversion to fixed-term loans, and refinancing or reduction of principal owed.
First-year payments of principal, interest, taxes and insurance will be targeted under the modifications to equate to 34 percent of the borrower's income, or 25 percent of income for borrowers for whom taxes and insurance are not escrowed.
Countrywide customers who want more information should call toll-free: 1-800-669-6607. Soon there also will be information at www.countrywide.com.
Bank of America / Countrywide also will pay $150 million to states nationwide in a Foreclosure Relief Program for eligible Countrywide customers who suffered foreclosure or who have made only minimal payments since their mortgages were originated. The states may use up to half of those funds for programs aimed at preventing foreclosures. Bank of America / Countrywide also will pay up to $70 million nationwide in payments for relocation assistance to borrowers unable to retain their homes, and will waive up to $60-$80 million in prepayment penalties and default fees.
Under the settlement, which does not constitute an admission of wrongdoing, Bank of America / Countrywide also agreed to stop offering pay option ARMs and significantly curtail offering "low-documentation" and "no-documentation" loans; initiate an early identification and contact program for people who have trouble making their payments; and continue working with non-profits, federal agencies, and state Attorneys General on ways to use real estate owned and other properties for community development.
The Bank of America / Countrywide settlement resolved investigations into Countrywide's lending practices by Washington, Arizona, Iowa, Ohio, and Texas. It also resolved lawsuits against Countrywide initiated by Illinois, California and Florida.
"Today's agreement will help eligible Washingtonians keep their homes," McKenna said. "As we've seen in the recent financial downturn, home foreclosures have a big impact on the economic health of our country and our state. Helping Washingtonians pay their mortgages and stay in their homes is the right thing to do for our citizens and for our economy."
Countrywide said the loan modification program will be ready for implementation by Dec. 1, and that the company would engage in proactive outreach to eligible customers by then.