B of A $8.8 BILLION SETTLEMENT May Prevent Thousands of Foreclosures in IL, Other States!

By
Real Estate Agent with Dean's Team - Keller Williams Realty Partners Chicago IL

It appears as if a good part of the old Countrywide Home Loans mess, acquired by the venerable Bank of America when they purchased the sub-prime loan giant earlier this year, may be headed to a somewhat happy ending.

During the "Old Days" for Countrywide, here in Chicago and across Illinois, the popular lender was one of the most active companies offering low-down payment, low-initial-interest-rate home loans to thousands of home borrowers.  Many have since gone into default, paying very few, or, in some cases, no payments on their new mortgage loan.

Under a court settlement announced today, affected borrowers in Illinois, as well as in the states of California, Iowa, Ohio, Texas, Arizona, Washington, and Connecticut, will receive modifications of their original home loans to make payments more affordable.  These first-ever mandatory modifications, it is hoped, will stop the foreclosures against thousands of distressed borrowers.

Illinois and the other states contended that Countrywide deliberately steered unqualified clients into confusing and risky loan programs without proof they could actually keep up with the payments.  Many considered the lender one of the most aggressive, offering thousands of home borrowers loans without proper financial documentation. 

Some loans had interest-only repayment schedules initially.   Others offered an initial "teaser rate".  When payments against principal soon became due, borrowers were overwhelmed by the far-higher monthly payments, and many defaulted.

Bank of America, in settling the lawsuit by Illinois Attorney General Lisa Madigan, as well as the Attorneys General of the other states involved in the litigation, has promised mortgage workouts at rates as low as 2.5% for those holding risky loans, and cash compensation to hundreds of others who have already lost their homes to foreclosure.

An additional six states may be party to a settlement with Bank of America, including Indiana, Michigan, North Carolina, and West Virginia, who are still negotiating with the bank.  Both the states affected and the lender hoped the agreed settlement would serve as a model for other lenders being pressured to reset payment schedules for homeowners with foreclosure risk.

The court settlement is the most aggressive worked out since trouble in the mortgage markets across the U.S. began last year - starting with risky sub-prime mortgages, but since spreading to the general mortgage market as well.  The risky Countrywide Mortgages will be re-worked so the borrower's monthly payment will not exceed 32% of the borrowing family's monthly household income. 

As we all know, many of the mortgaged homes have decreased in value since the homeowner's loan was closed, due to the weakened housing market here in Chicago and in other parts of the country.  Some of the Countrywide loans will be adjusted to reflect these new, reduced market values.  The main focus of the settlement program, however, would be to reduce required monthly house payments, rather than adjusting the amount of the loan. 

The settlement would apply to borrowers who took out Countrywide loans on or before December 31, 2007.   Bank of America has also agreed to halt foreclosure sales and not begin new foreclosure proceedings against its customers likely to qualify for loan modification.

Borrowers seeking relief under the settlement should contact Bank of America at 1-800-669-6607.  Alternatively, call Attorney General Madigan's Homeowners Referral Hotline - 1-866-544-7151.

For more information, as well as a link to David Greising's story in Monday's Chicago Tribune, view our post today via BlogChicagoHomes.com.

DEAN & DEAN'S TEAM CHICAGO

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Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. Brien Berard 10/08/2008 09:20 AM
  2. Mike Hughes 10/08/2008 08:57 PM
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Anonymous
Anonymous
Anonymous

Cudos to Bank of America

Oct 08, 2008 12:51 AM #11
Rainmaker
652,646
Bob & Carolin Benjamin
Benjamin Realty LLC - Gold Canyon, AZ
East Phoenix Arizona Homes

We are all going to be dealing with this one way or the other -- sellers affected, buyers affected - everyone will be affected somehow.

Oct 08, 2008 01:28 AM #12
Rainmaker
95,402
Michael Sahlman
www.HomesForVIPs.com - Keller Williams Realty - Miami Beach, FL
e-PRO - Miami Beach Florida Luxury Homes

Let's hope that it is true and many more banks take similar actions to ease the foreclosure rate among most homeowners and clean up the mortgage mess.

Oct 08, 2008 06:07 AM #13
Anonymous
Anonymous
Anonymous

Certainly a move in the right direction===now let's nope they REALLY help the people out.

Oct 08, 2008 06:29 AM #14
Rainmaker
98,153
Frances Flynn Thorsen
Cross Channel Marketing Consultants - State College, PA
Author | Educator | Reputation Marketer

Great post, Dean!!! I featured it today on Trulia's new Surviving the Housing Crisis page. It appears in "On the Web" in the lower left part of the page.

Oct 08, 2008 06:36 AM #15
Rainmaker
353,982
Dale Terry
Yadkinville, NC

Let's not go crazy here, BOA was dragged to the table on this one and it is getting much more that 8 billion from the government.  Maybe it will work out for homeowners, but I will reserve judgement until I see results.  Too many times the banks pay a fraction of the real cost and end up with massive profits in the end. 

Oct 08, 2008 06:48 AM #16
Rainer
4,428
Larry Isaacson
Bayside 81989 LP - Weston, FL

Dean:

Let's hope so and we have to start somewhere.

I believe everyone should look at all income steams as we enter a new paradigm. I have multiple income streams.

Larry

Oct 08, 2008 08:52 AM #17
Ambassador
1,818,131
Cindy Jones
Integrity Real Estate Group - Woodbridge, VA
Pentagon, Fort Belvoir & Quantico Real Estate News

Funny I posted this morning on a different question I am getting now from past buyers.  It is the WIFM question.  I'm making my payments but the unscrupulus buyers who didn't qualify are now the ones we are going to offer a bailout to and the rest of us are left holding on to worthless properties because we are managing to make our payments.  Doesn't seem quite right does it?

Oct 08, 2008 09:18 AM #18
Rainmaker
656,345
Jim & Maria Hart
Brand Name Real Estate - Charleston, SC
Charleston, SC Real Estate

Hey, Dean. Thank you for sharing this with everyone. I hope that you have a wonderful day, Jim

Oct 08, 2008 12:44 PM #19
Rainer
73,749
Dan Magstadt
CrossCountry Mortgage - Lake City, FL

This is great information! It's definitely something I'll keep around for reference in the future!

DM

Oct 08, 2008 01:06 PM #20
Rainer
8,473
Holt Barber
Ebby Halliday Realtors - Carrollton, TX

I am in the process of working on a short-sale in Chicago with CountryWide.  So far they have been ok to work with but I am only 1 month into a 2-3 month process. 

 

Holt Barner

Oct 08, 2008 02:35 PM #21
Rainmaker
1,377,429
Charles Stallions
Charles Stallions Real Estate Services - Pensacola, FL
800-309-3414 - Pensacola, Pace or Gulf Breeze, Fl.

Rescue me, Bail out me, Hey everyone owes me and I want mine. What do I here you saying, when will it all stop as soon as people realize nothing is free and the only people that make money in courts are lawyers. 

Fast forward 10 years, heck just 3 years and lets see how many of these homeowners are making payments or how many are back at the government trough asking for another bailout.

 I remember 12 years ago when I bought my current home I was talked into a 15 year vs a 30 year mortgage. After 3 years I was struggling, kids, auto loans and a new business etc. Where in the H... was my bailout. Countrywide didn't force me to do that loan.

So I did what any American back then did I got a second job cashiering at a convenient store for 4 hours a night, when that didn't quite get it done I started throwing papers from midnight till 5 in the morning. Yes I was working 15 hours four days a week and 21 the other three. Guess what I made it and without a bailout. My business has done well and in three years that house will be paid off. Folks we need a hand up not a hand out.

Oct 08, 2008 04:59 PM #22
Rainer
76,774
Chuck Christensen
Your Financial Coach - Bellingham, WA

Charles thats great that you could do tha...work 3 jobs and make some extra money. My wife has a good job, but they make sure her hours are all over so that she can't work somewhere else also. She doesn't need to but some of the others she works with would be fine if tey could do that. Instead the company works her form 7 to 4:30 one day and noon to 8:30 the next. Corporate control...

Oct 08, 2008 06:00 PM #23
Anonymous
Anonymous
Bill Anderson

Where is the millions and millions of dollars and more like Billions of dollars that people have paid for PMI Insurance?

Oct 08, 2008 07:49 PM #24
Rainer
17,183
Vickie Barrington
Bluewater Real Estate - Atlantic Beach, NC
Carteret County Real Estate

I hope that many will be able to keep their homes because of this. We will have to wait and see how things really turn out.

Oct 08, 2008 08:43 PM #25
Anonymous
Anonymous
Anonymous

It was on the local news here in Las Vegas that Nevada was an included state.  I don't see that in your article but hope the news was correct.

Oct 08, 2008 11:31 PM #26
Anonymous
Anonymous
Anonymous

Thanks for your informative blog.

Oct 09, 2008 10:49 AM #27
Anonymous
Anonymous
Jacci Wickware

I agree - WHERE'S THE PMI.  ALL THAT MORTGAGE INSURANCE !!!  WHERE IS IT?  ARE THE INSURANCE COMPANIES JUST  "KEEPING QUIET?"  WHY DIDN"T OUR STUPID GOVERNMENT LOOK FOR MONEY ELSEWHERE ???   OOPS, I FORGOT....BIG INSURANCE AND BIG CORPORATE EVERYTHING ALWAYS WINS!!!!  IT'S THE FLIP SIDE OF WELFARE !!!!!!!!!

Oct 09, 2008 12:44 PM #28
Rainmaker
362,833
Dean Moss
Dean's Team - Keller Williams Realty Partners Chicago IL - Chicago, IL
Dean's Team Chicago IL Real Estate Team

Hey, folks -

Thanks for all your comments on our post about B of A/Countrywide.

FYI - for those of you asking about PMI - I would imagine many of these loans did not have PMI, since they were risky piggyback mortgages.

Further, I don't think it's a question of "Will They Modify?".  They have to, or they will be in violation of their agreement made in court.

Thanks once again for visiting, and for taking the time to comment on this important matter.

DEAN & DEAN'S TEAM CHICAGO

Oct 09, 2008 12:56 PM #29
Rainmaker
479,151
Harrison K. Long
Coldwell Banker Previews, Irvine, South OC - Irvine, CA
business, REALTOR , GRI, Broker

Good for BofA that it is making this decisions to settle with the Illinois homeowners to modify their Countrywide loans.  This is not surprising, and BofA is still in good shape financially and knew they were going to have to pay money to resolve this litigation.

Jul 11, 2009 12:17 AM #30
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Rainmaker
362,833

Dean Moss

Dean's Team Chicago IL Real Estate Team
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