Almost $10 million will be provided to homeowners in Michigan that is the result of a state settlement with mortgage lender Countrywide Financial Corp. and Bank of America. The assistance will go to about 3,700 Michigan homeowners who lost their homes to foreclosure, according to Michigan Attorney General Mike Cox.
While the state was involved in suing the lender in partnership with a few dozen other states across the nation, Cox continued by saying that he and six other state attorney generals have successfully negotiated settlements with Countrywide and are forcing Countrywide (now Bank of America) to provide this mortgage aid to struggling homeowners. The money being paid out is the result of the questionable lending practices exercised by employees and management of Countrywide. For example, many representatives from the bank were involved in issuing questionable or maybe even illegal mortgages. Some of what they were doing is considered predatory lending and the lawsuits and settlement are intended to right that wrong.
In total, 3,697 families who had sub-prime and pay-option adjustable rate mortgages between Jan. 1, 2004 and Dec. 31, 2008 and who later lost their home will each receive $1,800. In total, this $6.7 million is assistance makes up two-thirds of the settlement agreed to with Countrywide. While it is not a significant amount of money by any means, through this settlement families and individuals across Michigan will receive a little bit of a helping hand from the bank.
Almost 10,000 current homeowners will be able to refinance their home loan(s) as a result of this agreement. Countrywide/Bank of America is allocating over $100 million towards the refinancing of those mortgages. This may involve reducing the interest rate, extending the payment terms, or maybe even reducing the principal balance that is due. This should allow homeowners to afford the monthly payment on their home going forward.
In addition to those funds, the settlement also includes $1.2 million to be paid to the United Way of Southeastern Michigan to help pay for its family crisis telephone line. Also, grants totaling $250,000 each are being issued to the city of Detroit and the nonprofit Focus: HOPE. This money will help neighborhoods and cities with distressed and abandoned homes in their neighborhood. More housing-related funds and grants for charities and communities are expected to be announced soon for Michigan families, with the goal to sop foreclosures.
In addition, last year, Countrywide agreed to pay an additional $130 million to re-negotiate about thousands of over loans in Michigan, which is in addition to the $9.9 million in grant money and payments detailed above.
There will also be more regulations placed onto Countrywide to ensure that they can’t take advantage of homeowners in the future. Michigan is placing provisions to stop them from issuing sub-prime and option ARM mortgages. There will also be additional oversights placed on the lender by the Attorney General's office.
Qualifications will need to be met. In order to be qualified for the financial assistance or loan modification, borrowers had to have received a loan from Countrywide Financial. The borrowers home also needed to be foreclosed on. Another condition includes families needed to have received pay option loans (e.g. adjustable rate mortgages) or a sub-prime loan. While Countrywide is pro-actively contacting customers, potentially eligible borrowers have a couple other choices. They may have received a letter and/or a claim form from the Attorney General in Michigan, or they can decide to call 866-411-6987 for details on the settlement.
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