Countrywide providing mortgage modifications.
Almost 500,000 homeowners who took out a mortgage with Countrywide, now owned by Bank of America, are able to receive free mortgage modifications as the result of a lawsuit between Countrywide and almost 30 state governments. Countrywide plans to modify loans for homeowners in states including, Arizona, Illinois, Connecticut, Florida, Iowa, Michigan, North Carolina, California, Ohio, Pennsylvania, Washington, Texas, and more. In addition, homeowners that live in other states may be able to participate in the mortgage assistance program their state agrees to join the settlement.
Countrywide and Bank of America will spend almost $10 billion to reduce the principal or interest rate on the high priced mortgages that may have been illegally issued. They are trying to provide mortgage help so that borrowers can afford the monthly payments and prevent foreclosures.
This agreement by Countrywide and settlement of the lawsuit also is a huge breakthrough for the housing industry because Countrywide was by far the nation's largest originator of subprime, adjustable rate, interest only, and other risky mortgages until Countrywide collapsed in 2008. A large part of the overall housing and mortgage crisis can be traced back to deceptive loans issued by Countrywide. The settlement calls for Bank of America and Countrywide to:
- Create an almost $200 million Foreclosure Relief Fund to help mortgage borrowers with ARM or subprime loans who lost their homes to foreclosure because of either an early payment default or a default when the interest rate reset to a higher interest rate. To qualify for aid from this fund, you must have made six mortgage payments or less and you also must have lost your home to foreclosure.
- Countrywide and Bank of America will suspend foreclosures on the riskiest loans so that they have time to examine what refinancing options homeowners may have. If you are facing an imminent foreclosure, contact Countrywide to talk with a customer service representative or loan expert about your for help with your mortgage. This will stop the foreclosure process.
- They will pay for relocation to homeowners that are facing an immediate foreclosure and that do not qualify for mortgage help. The first goal of the program is to keep people in their homes. However, if you call to modify your mortgage, if you do not have an adequate income, or if you do not feel you can handle an interest rate at a low 2.5% and choose not to stay in the home, Countrywide will try to offer you relocation assistance and provide you with funds to move. Countrywide has allotted almost $100 million to help people move and they hope to help almost 50,000 borrowers.
- The current loan-to-value ratio must be 75% or higher, however exceptions can be made.
- Countrywide is to renegotiate and modify the terms of these loans to ensure that overall mortgage payments don't exceed 34% of the borrower's household income.
- Homeowners will be refinanced into a fixed-rate mortgage at a low, competitive interest rate and the loan will be guaranteed by the Federal Housing Administration under the federal governments Hope for Homeowners Program.
- To be eligible for the free mortgage modification and help from this assistance program, the home must be your primary home and you must have paid for it with a Countrywide subprime ARM or pay-option ARM that was originated before Dec. 31, 2007.
If you need mortgage or foreclosure assistance, or help paying your mortgage, contact Countrywide. While starting Dec. 1, Countrywide was to begin contacting borrowers who were more than 60 days behind on their paying their mortgage, you need to be proactive and contact them if you have not heard from them.
If homeowners can't qualify for an FHA guaranteed loan, Countrywide will still provide help and allow borrowers with:
- Subprime, fixed-rate loans to reduce their interest rate to as little as 2.5%.
- Adjustable-rate or subprime loans to keep their initial low interest rate “teaser” agreement for five years. If they can no longer afford to pay the low interest rate teaser, the interest rate could be dropped as low as 3.5%.
- Borrowers with Option ARMs can convert their loans into fixed-rate or 10-year, interest-only loans for free and the interest rate will be reduced to as little a 2.5% in order to bring the payments down to a total of no more than 34% of the borrowers' total household income.
As mentioned, these mortgage modifications will be free as Countrywide is paying for the cost for the refinancing or modification. In addition, they will will waive all prepayment penalties and won't charge any other fees.