Bill Kamboukos

Loan Modification Help For Some Home Owners:

Settlement Opens Door For Countrywide Customers

However, it is also important to note that this program is in response to legal action brought against Countrywide (bought in July by Bank of America) from eleven different states for unfair lending practices.

The program is scheduled to start in December and will be open to distressed borrowers who signed up with Countrywide Financial between January 1, 2004 and December 31, 2007.

This new program came in a legal settlement that the company entered into with the attorney general offices of 11 states, who had sued Countrywide over predatory lending practices, but the company stated that borrowers in all 50 states will be eligible to participate in the program. However, it will be up to state legislative bodies to work with Bank of American to make this a reality.

"The Countrywide settlement is a watershed moment for loan modification programs," said Mark Pearce, North Carolina's Deputy Commissioner of Banks and a member of the State Foreclosure Prevention Working Group. "This is, by far, the best [program ever], even better than the FDIC program with IndyMac Bank."

As part of the initiative, Bank of America will cut monthly housing payments, including mortgage, property taxes and insurance, to no more than 34% of gross income for at least the first year of the new loan. The move is expected to help keep as many as 400,000 troubled borrowers in their homes, but of course like many other programs, we will hold final judgement until the program takes effect.

The program targets holders of subprime adjustable rate mortgage (ARMs), subprime fixed rate loans and option ARMs, but prime and Alt-A borrowers, who did not document their income, will be eligible as well.

"This is the biggest mandatory modification of loans in U.S. history," said Jerry Brown, attorney general of California, the state with the largest number of borrowers who may benefit from the settlement. "Of course, we never saw such a big rip-off by any other company either."

According to Simon, the Countrywide program will proactively screen all of its borrowers for eligibility, and then contact them directly to offer loan workouts. No prepayment penalties or modification fees will apply. But the program can't help every Countrywide borrower. Some, because of illness, divorce, job loss and the like, simply won't be able to afford any reasonable mortgage payment.

Simon added that Bank of America is training personnel and putting systems into place that it hopes will enable staff to deal with a large number of mortgages all at once.

The new program comes with a price tag of $8.4 billion, but Simon says that it will cost much less than foreclosing on homes en masse.

Depending on each borrower's circumstances, Bank of America might freeze or lower a loan's interest rate or even cut the principal loan balance, through a streamlined process. The bank said it will also participate in the government's Hope for Homeowners program, a provision of the housing rescue bill which went into effect Oct. 1 and makes FHA-insured loans available for delinquent borrowers.

The announcement of the program came on the heels of Friday's approval of the $700 billion wall street bailout, a measure which has been criticized for failing to address the foreclosure crisis head on. .

"Now that we've gotten this with Countrywide, I would expect that we'll be talking with other major servicers to implement similar programs in the near future," said North Carolina Deputy Commissioner of Banks Mark Pearce, who worked on this settlement.

But he and other members of the the State Foreclosure Prevention Working Group have been pushing other lenders to do something this drastic for months, without much luck.

"So far, they have failed to show the leadership required to get it done," said Pearce. "I hope, having the market leader do this will spur the other servicers to greater action."

For more information on this loan modification program and other modification, please contact Bill Kamboukos and Carlos Felix of Strategic Mortgage at (480) 219-3682 or by emailing: info@strategicmtgaz.com or online at www.strategicmtgaz.com