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| Bank Of America Offers $8.6 Billion To Resolve Countrywide Unsafe Loans |
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| Monday, 06 October 2008 | |
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Bank of America declared an $8.6 billion deal to resolve claims brought by the U.S. state attorneys-general concerning certain unsafe loans initiated by Countrywide Financial Corp. This deal would cover almost 400,000 borrowers.
This is applicable to people that financed their mortgages with sub-prime borrowing or by pay-option with ARM that was provided by Countrywide that initiated before Dec 31, 2007. Countrywide was acquired in July for a $4 billion in stock by Bank of America when its risky subprime mortgage loans began to loose. A Bank of America spokesman said that this deal would cover 390,000 borrowers. This is applicable to borrowers that took out subprime loans for their homes with fixed rate of interest or adjustable rates of interest provided by Countrywide Financial Corp. The expense of the $8.6 billion program would be shared by Bank of America and their investors that own securities consisting of mortgages that were initiated by Countrywide or by third parties who sold their loans to Countrywide. The mortgages that were eligible originated before Dec. 31, 2007. Nearly 12% of the eligible loans were detained by Bank of America and the price of the restructuring of these loans is "within the range of losses we estimated when we acquired Countrywide," per a statement by Bank of America. The Bank of America spokesman said "We are seeking to put customers into loan modifications that are affordable and sustainable," regarding the costs of the program he added that they "have already been estimated and accounted for" by Bank of America as a part of its getting hold of Countrywide. The program includes trying to refinance borrowers into government-supported loans under the Federal Hope for Homeowners program thereby lowering interest rates. For those borrowers that have an option adjustable-rate mortgage, the principal will be discounted so that the lost equity will be regained for certain borrowers. The bank stated, those eligible Countrywide customers that occupy their home as their primary residence will not be charged with loan modification fee or prepayment penalties for their subprime loans and the pay option ARM loans will be waived. About $150 million have been set out-of-the-way for borrowers in select states, especially for those who suffered foreclosure or for those that are currently at a serious risk of foreclosure with making only minimal payments since the time of their mortgages that were initiated by Countrywide. Joe Price, the CFO of the Charlotte, North Carolina based bank said in the statement "Our program represents principal and interest reductions over time to borrowers on loans Countrywide owns and on loans Countrywide services on behalf of investors.” |
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