Countrywide to lower interest rates in settlement

Monday, March 2, 2009 | 1:26 p.m.

Mortgage giant Countrywide Financial Corp. has agreed in Nevada to lower interest rates for some borrowers, pay settlements and relocation expenses for some borrowers who lost their homes and reform its lending practices to settle a predatory lending lawsuit filed by the state's attorney general.

In a consent judgment filed last week in Clark County District Court, Countrywide agreed to pay about $3 million to Nevada borrowers who were victimized by its lending practices.

As part of a settlement with other states, Countrywide said it also plans to reimburse about 35,000 homeowners nationwide some $70 million for relocation expenses caused by it foreclosing on their homes.

And by the end of this month, some 50,000 loan modifications are to be offered nationwide, the settlement said.

Countrywide, without admitting wrongdoing, said its loan servicers "will maintain robust practices for early identification and contact with borrowers who are having, or are reasonably expected to have, trouble making their payments on Countrywide residential mortgage loans.''

"Under these processes, when contact is made with such borrowers, an individualized evaluation of the borrowers' economic circumstances will be made to determine if alternatives to foreclosure are available, and consistent with the directions of the investors, if applicable,'' the judgment says. "Countrywide servicers will maintain the current practice of offering loan modifications or other workout solutions to borrowers who are 30 days or more delinquent in their payments, who desire to remain in their homes and who can afford to make reasonable mortgage payments, subject to applicable investor guidance and approvals.''

Countrywide also said its loan servicers would continue to monitor its portfolio to identify high-delinquency loans that would be appropriate for modification campaigns aimed at keeping borrowers in their homes, and report the results to the attorney general.

In a lawsuit against Countrywide, Attorney General Catherine Cortez Masto said that in recent years, Countrywide increased its market share in violation of the Nevada Deceptive Trade Practices Act by "engaging in unfair and deceptive business practices that places thousands of borrowers in risky, high-priced and ultimately unaffordable mortgage subprime loans.''

"Defendant's practices have included placing borrowers in risky subprime loans for with they were unqualified according to underwriting standards, structuring unfair subprime loan products with risky features, offering illusory initial savings features such as 'teaser' rates and low or no closing costs to induce borrowers to accept unaffordable subprime loans, engaging in misleading marketing and sales techniques and offering financial incentives to employees and brokers to sell more and more non-traditional subprime loans with increasingly less adherence to underwriting guidelines,'' the suit charged.

Cortez Masto complained that the result has increased delinquencies and foreclosures of homes in Nevada, which leads the nation in foreclosures.

Bank of America, which purchased Countrywide last year, has said it's trying to work out Countrywide's subprime loans with the intent of keeping homeowners in their homes when possible. Bank of America last month announced a moratorium on foreclosures as it applauded President Barack Obama's foreclosure relief plan.

The moratorium will be extended until details of the Homeowner Affordability and Stability Plan are released. The moratorium includes first mortgage loans owned and serviced by B of A, Countrywide and subsidiaries of Merrill Lynch, which it also purchased last year.

Steve Green can be reached at 990-7714 or steve.green@hbcpub.com.