Colorado Attorney General John Suthers has entered into a settlement with Countrywide Financial Corp. and several of its affiliated entities, over the marketing of subprime and other high-risk mortgage products in Colorado. As part of the agreement, Countrywide will make nearly $6 million available to eligible Colorado borrowers and to the state, including $500,000 for the Colorado Department of Local Affairs Division of Housing to support the continued operation and expansion of the Colorado Foreclosure Hotline.
The settlement was approved Feb. 3 by Denver District Court Judge Herbert L. Stern III. In its complaint supporting the settlement agreement, the state alleged that Countrywide engaged in a series of deceptive trade practices by placing borrowers in high-cost loans that carried an even higher risk of delinquency and default. The complaint alleged that Countrywide used loose underwriting standards to place borrowers in loans that quickly became unaffordable as introductory rates expired and borrowers' monthly payments dramatically increased.
Under the settlement agreement, Countrywide will help its borrowers who are in default or facing foreclosure save their homes through fast-track loan modification on subprime or option adjustable-rate mortgage loans, resulting in reduced mortgage payments. The program offers a series of loan modifications, including lowering the interest rate as low as 3.5% for five years to make house payments more affordable. Alternatively, Countrywide can make loans interest-only for up to 10 years.
It is estimated that approximately 6,800 Colorado homeowners stand to benefit from the loan modification program. Waivers of certain late fees and prepayment penalties are expected to result in a combined savings of more than $2.1 million. Borrowers that do not qualify for a loan modification under the settlement, or who previously went into default and lost their homes to foreclosure after only a few payments, may be eligible to receive compensation under the settlement.
SOURCE: Office of Colorado Attorney General John Suthers