Countrywide to offer Floridians $1-billion refund

Countrywide, the nation's largest mortgage lender during the housing boom, is settling a "predatory lending" lawsuit by giving $8.4-billion in loan relief to borrowers in Florida and beyond.

Acquired this year by Bank of America, Countrywide will adjust monthly payments for an estimated 400,000 borrowers. In most cases the relief will come in the form of moving homeowners with adjustable rate mortgages into fixed-rate loans. Countrywide will waive the fees normally associated with refinancing.

About $1-billion of the money could go to an estimated 57,000 qualified Countrywide customers in Florida, state attorney general Bill McCollum said. The company also promised to halt foreclosure proceedings, at least temporarily, on eligible loans in Florida.

There's a catch: The homeowner must be able to afford the newly lowered house payments. Makes sense to me. Why go through the hassle of loan modification when the person is still a prime foreclosure risk?

At the risk of sounding unsympathetic, a lot of people were packed into these less-than-stellar home financing deals because they were legitimately high risk borrowers (mediocre credit, too much consumer debt, spotty job history, etc).

They probably shouldn't have bought a home, but fell for the siren's song of "real estate always appreciates." If Countrywide fed the delusion, I suppose there's some justice in them fronting cash to clean up the mess.

More here.

Comments

[Sim]

Thorner should have a greater grasp of the facts before you ad your commentary. The great number of these borrowers were people who were paying their 30 year fixed loans before CW came around and sold them a bridge. The group you chstise represents a minority.

[James Thorner]

Sim, I'm open minded. Please convince me. Show me the source. Are you suggesting that in most of these cases Countrywide lured homeowners away from their solid 30-year fixed loans and tricked them into refinancing with high interest adjustables? I'm not being sarcastic. I really want to add that to the story if true. FYI: I refinanced into a 5-year ARM with Countrywide, but it made financial sense to do so. I sold the house within 4 years, before the the rate increased from the starter rate of 4.5 percent. I saved about $7,000 from what I would have paid with my previous fixed rate loan. So these things CAN make sense, though admittedly many people applied for these loans recklessly.

[KB]

Ok, so this means that if I had just stopped paying my mortgage, for - I don't know - maybe 3 or 4 months - I might be able to qualify for this program now? Get my mortgage REDUCED, and get a lower interest rate to boot?

Truly, this whole deal is telling me, my neighbors and my children that it DOES NOT pay to be honest, upstanding citizens.

Better to lie about your income, cheat by not paying mortgage payments, and lie some more about why you can't make your monthly payments.

If you do these things, and do them WELL, you will be rewarded with a reduced mortgage, a lower interest rate and lower monthly payments.

This is the biggest swindle in American history.

[Tino]

KB has it right.

I would require that anyone who is requesting a loan reset has to back up the financial information to support their ORIGINAL loan request, as well as the new one.

I still do not believe in the "predatory lender" hoax. I have yet to hear of a homeowner who was forced to sign their documentation at gunpoint. If you signed it, you owe it.

[Holly]

It all smells like greed and corruption. If you listened to Richard Fuld, former CEO, of now defunked Lehmans, eveyone would be calling for their heads! Meanwhile, back at the ranch, Richard is laughing all the way to the bank. Sinful!

[Fuzzy Bear]

There's a catch: The homeowner must be able to afford the newly lowered house payments.

Too little too late! the catch should reduce the number down to about 100,000 or lower. Most of the properties were flipper properties.

[James Thorner]

It does seem backwards. I've got a nghbor who hasn't made a mortgage payment in about a year. Same model house as mine, bought a few months apart. Yet he claims he's eligible to get some sort of federally back loan foregiveness, slate wiped clean, no foreclosure on his record. Sucker that I am, I've been making my payments religiously. Should have defaulted and blamed society, Red Dye #2, the devil, a Twinkie alergy, etc...

[Chris]

As much as it sucks, I'm alright if the gov't wants to step in and work out mortgages for distressed homeowners, but ONLY IF the gov't get's it all back when they sell...

Hence, if the gov't resets the loan based on a priniple value $50k less than the original, the homeowner should owe $50k when they sell the house. So what if they are upside down for a while - they wanted to keep the house, right?

Same thing for if the interest rate is dropped... The gov't should get it's fair share back when they sell.

Let's help ourselves by helping them right now, but also making sure we don't get taken for a sucker!

[Curt]

I know a lot of people that refinanced their homes poorly. One guy I know only owed thirty eight thousand on his house. He now owes one hundred thirty five on his home. He wasted more than half of that money, and now he can barely make the payment. I could go on with a few more stories, but this would prove my point. Many people can't manage credit wisely. This is why banks used to be tighter with credit. This is also why there used to be more goverment regulation on lenders. With out regulation greed and stupidity have destroyed our financial system and wrecked our economoy.

[Fuzzy Bear]

Should have defaulted and blamed society, Red Dye #2, the devil, a Twinkie alergy, etc...

James, your nghbor is in for a rude awakening! Perhaps your nghbor can wait ten years and then on average his home will nearly double as the NAR puts it.

Then again the doubling is nothing more than just one more myth put out by special interest groups to fool the unsuspecting public.

[Donna]

In all the sub-prime mortgage mess there needs to be a different standard for owner occupied homesteads and investor owned properties (flippers). In the past it was assumed the lender's self interest would not allow him/her to lend money to non-credit worthy borrowers. However when you are only going to hold a 15 to 30 year mortgage for a few months before you pass it on to a "greater fool", the whole game changes.

[Entrepreneur]

The banks should forclose on those who cannot pay. Simple. I, for one, am looking forward to buying these houses after the bank starts auctioning them off at low prices.

[Jean]

I personally would like to see the government put these new found properties "they" own provided at a bargain price to our war veterans and their families. To see these men and women unable to afford housing and some of them with medical issues that literally puts them on the streets is the most heart breaking of all. They've given of themselves, now let's show them we CAN and WILL give them some of the things they truly deserve. Yes, I know there are loans for Vet's at low interest rates - I'm talking going beyond that. If we can afford to bail out billionaires under the pretense that we're helping main street, let's walk the walk.

[kris]

I agree house flippers should be regulated a little bit more. Rules apply that a person can only sell X amount of cars a year before they have to be a licensed car dealer. Why not the same for house flippers.

[Pablo Mastodon]

It seems that all anyone can talk about is the "predatory lenders," but it seems to me that it was really a conspiracy (not consciously orchestrated as such, but a "confluence of interests" one) of multiple players who were ALL walking away with pocketfuls of money. How is it that the first thing the appraiser requires is to know the contracted price? I know from personal experience on my block that homes were being sold for OUTRAGEOUSLY high prices that could not possibly have been substantiated by any real appraisal. But the Sellers were making FAT money, the realtors, the mortgage brokers, and the appraisers all got their cut SO LONG AS THE DEAL CLOSED, and I can supply specific examples to anyone who is interested. I think more fraud occurred at that end of the table, yet I haven;t even seen that possibility mentioned in any of the voluminous coverage on the issue.

[Sim]

Essentially what you did Thorner was no different then most. In many instances the borrower was 10-15 years into a 30 year fixed when he was approached by CW. You were just lucky to sell in time. Yes, there have been lawsuits nationwide regarding CW and other lenders illegaly accessing credit reports to target specific people for their loans. Their loan packages essentially increased the payoff of the loan and in exchange gave the borrower a low intro rate. Strangely enough, the borrower did not actually get extra money out of the house as believed. Many times the payoff value increased due to the excessive closing costs and ysps. Unfortunately, in many many instances, the reset payment was never properly disclosed. Other examples include borrowers who spent all of the necessary time, effort and money in search of a new purchase who had the terms switched at the table. Most of these borrowers were not in a position to walk out and start over as they were already in too deep (in terms of lease commitments, storage, moving expenses). In other instances, rates were switched at the table by unscrupulous brokers who were encouraged by lenders with yield spread premiums. In these instances, the borrower was given an artifically inflated rate (pushed into subprime) b/c CW and the selling brokers made more profit, but this was never disclosed to the borrowers.. To ask me to 'show you' what CW and other lenders did is an impossibility, especially for the unwilling. But, I suggest you do some actual research b/c the examples of these practices are everywhere and readily available with google searches. Possibly start with the 12 class actions filed by State AGs against CW which recently settled today. Maybe look into the city of Cleveland's action against numeorus lenders. Finally, look into class actionsuits against CW for illegaly accessing consmer credit reports. Do you think these people were targeted by coincidence? Yes, many borrowers had no clue and should not have been borrowing in the first place. At the same time these were the same borrowers targeted by these companies for their loan products. The federal statutes prohibiting this type of behavior are voluminous. I suggest starting with a quick reading of TILA. Countrywide made their money by selling these products in mass. Their own auditors knew these loans would likely fail, but that was never the point. To absolve CW and other lenders of their greater share of the responsibility and liability is socially irresponsible.

[clb]

You know if the goverment would give ALL homeowners a break we'd be in better shape! 700 Billion... that would be plenty to pay off most of our homes:)

[Tino]

"Unscrupulous brokers"? "predatory lenders"? Give me a break. I have yet to hear of a case where someone was forced to sign a mortgage at gunpoint.

Sorry, Sim and clb, the whole problem started because of the economic fallacy that EVERYONE should be able to own a home, regardless of income or credit history.

Until we realize that we don't live in Lake Wobegon, the problems will continue. What solution do you propose that will keep someone making $30k a year in a $400,000 house?

[Tino]

Opps. My bad. Apparently saying that you should be able to afford a home before buying a home is a racist statement:

http://www.breitbart.com/article.php?id=D93LAKT01&show_article=1

[Alex]

Tino, I assume you're referring to the Community Reinvestment Act. As far as I understand it, that's where the whole problem begins.