By tapping into a foreclosure relief fund of $150 million, Countrywide Financial Corp. will provide loan modifications to assist up to 395,000 borrowers nationwide, resolving allegations that Countrywide developed and used unfair and deceptive practices in its origination and servicing business.
Of this amount, $1.64 million is reserved for Kentucky borrowers, according to the state's attorney general, Jack Conway. Approximately 2,500 Kentuckians will be offered loan modifications to restructure their Countrywide mortgages. Countrywide has agreed to restructure more than $262 million of outstanding debt owed by Kentucky borrowers under this agreement.
"This mandatory loan modification program will provide immediate relief to Kentucky borrowers who are facing foreclosure," Conway says. "The goal is to help these borrowers remain in their homes into the future with an affordable mortgage loan."
As part of this agreement, Countrywide has agreed to a range of best practices. In the Assurance of Voluntary Compliance filed in Franklin Circuit Court, the company denies all allegations against it and does not admit to any wrongdoing.
However, the following changes shall be implemented by Countrywide and parent company Bank of America, including the suspension of foreclosure sales on loans likely to qualify for the loan modification, the establishment of an early identification and contact program for borrowers who are having problems making their monthly payments, and discontinuation of pay option adjustable-rate mortgage (ARM) offers.
Countrywide and Bank of America must also establish a Foreclosure Relief Fund of $8.5 million nationwide to provide payments to borrowers who lost their home through foreclosure where the borrower was sold a subprime or pay option ARM loan and the borrower defaulted early during the loan term (within 6 months after closing) or at the time the interest rate reset.
Loan modification and late fees will be waived, according to the attorney general's press statement, and Countrywide will waive prepayment penalties on subprime and pay option ARM loans.
SOURCE: Office of Attorney General Jack Conway