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-Bloggged 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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Topic:
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Comments 30 New Comment

Anonymous #26
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.

October 08, 2008 11:31 PM
Anonymous #27
Anonymous
Anonymous

Thanks for your informative blog.

October 09, 2008 10:49 AM
Anonymous #28
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 !!!!!!!!!

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

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

October 09, 2008 12:56 PM
Rainmaker
461,064
Harrison K. Long
business, REALTOR , GRI, Broker
Coldwell Banker Previews, Irvine, South OC

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.

July 11, 2009 12:17 AM
Rainmaker
362,833

Dean Moss

Dean's Team Chicago IL Real Estate Team
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