It was announced today by the Florida Attorney General, Bill McCollum, that Florida and Countrywide Mortgage, a subsidiary of Bank of America, have come to a huge mortgage relief agreement. While promising to ease in the current housing crisis, this settlement will provide for $150 Million in mortgage foreclosure relief.
As there are over 57 Thousand homeowners in the State of Florida with a Countrywide mortgage loan, this is by no means a small deal. With Florida taking the lead, it is estimated that when the rest of the states finalize their agreements with Countrywide Mortgage, we could see nearly $1billion in total relief to Floridians and up to $8 billion across the entire United States.
Settlement Between Florida and Countrywide Mortgage
In a nutshell, the settlement by Bank of America is a payback for unfair loan practices by Countrywide Mortgage (prior to it being bought by Bank of America). The lawsuit had claimed that Countrywide put borrowers into mortgages that they could not afford or into loans with misleading rates and/or misleading penalty clauses. Countrywide was accused of creating loan products that sold for a premium to investment banks while hiding or misrepresenting the terms and the dangers of these types of loans from the borrower and from the buyer of the loans.
The Florida Attorney General McCollum stated “I appreciate Bank of America’s commitment to rectify the situations created by Countrywide’s loan practices.” Based upon the terms of the agreement, I suspect he really appreciates their commitment. The terms of the agreement include 3 good reasons you might now wish you had borrowed from Countrywide:
- Loan Modification Program - This is for owner-occupants with subprime home loans that will allow them to move into fixed-rate, fully amortizing loans “that they can afford.” I’m wondering what the measurement criteria to determine affordability will be.
- Cash Payments - Will be made to “eligible individual borrowers who have lost their homes to foreclosure” from one of these Countrywide mortgage loans. Florida is going to see nearly $20 million of the $150 million available nationwide for this relief. I bet this money runs dry long before the line of people finishes forming for the funds.
- Late Fee Abatement - Roughly $79 million nationwide will be waived in late fees that resulted from these loan programs, with almost $10 million of that in Florida. Additionally, Bank of America will waive nearly $56 million in prepayment penalties, with roughly $8 million of that for Countrywide loans in Florida.
- Dismissal of the lawsuit against Countrywide Mortgage and Bank of America - It looks like with this set in place, Bank of America will be able to attain a dismissal of all charges that were incurred for Countrywide’s loan practices.
With Florida being the first to reach an agreement with Bank of America, I’m betting the table is now set for Arizona, California, Connecticut, Illinois, Iowa, Michigan, Ohio, Texas and Washington, and it won’t be long for others to jump on board. But will this help the overall market?
Do you think that this settlement will lead the states to go after other lenders? Will this be similar to the tobacco company witch trials that occurred in the 1990s, leading to large attorney fees and little affect on the average Joe? I would love to see reader responses in the comments section below.
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real estate
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Tony Orlando 10.06.08 at 6:44 pm
Hi. I read a few of your other posts and wanted to know if you would be interested in exchanging blogroll links?
Michelle 10.07.08 at 4:44 pm
It seem like this could really be a good thing for real estate. I wonder if other lenders are going to be brought to task as well.
Mortgage Loan 10.20.08 at 12:26 pm
Good info. Getting a mortgage loan can be a bit scary and it’s good to have as much information as possible before making a decision.