Countrywide, the nation’s largest lender and loan servicer, recently acquired by Bank of America, had been sued by 11 states over what they said were predatory lending practices. The company agreed to the largest program ever to modify home loans.
To settle the suits, Countrywide will provide $8.4 billion in direct loan relief, affecting an estimated 400,000 borrowers nationwide, while waiving certain fees -- $79 million in late fees and $56 million in repayment penalties. The company will also set aside $150 million to help borrowers in foreclosure or whose homes have already been foreclosed on and $70 million to help troubled borrowers relocate to rental housing.
The agreement comes just days after President Bush signed a giant financial rescue package without any relief for distressed homeowners. It is the most comprehensive mandatory workout program since the mortgage crisis began last year. Attorney generals Jerry Brown of California and Lisa Madigan of Illinois led the negotiations for the states – including Michigan, Ohio, Florida, North Carolina, Washington, Arizona, Connecticut, Iowa and Texas. Brown said the goal was to help as many people as possible stay in their homes and get some compensation for those who have already been pushed out of their homes.