Oct 6, 2008 5:41 pm US/Central
Countrywide To Pay $8.7 Billion To 11 States
Illinois Homeowners To Get $185 Million In Loan Modifications
CHICAGO (CBS) ―
Illinois Attorney General Lisa Madigan on Monday announced an $8.7 billion settlement in a predatory lending lawsuit her office filed against mortgage lender Countrywide.
Madigan and California Attorney General Jerry Brown led the national settlement, in which nine other states also joined, according to a news release from Madigan's office.
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Homeowners with questions about the settlement and what it might mean to them may call Bank of America, which acquired Countrywide shortly after the lawsuit was filed, at (800) 669-6607, or Madigan's Homeowners Referral Hotline, at (866) 544-7151. The line is open from 8 a.m. to 8 p.m. weekdays.
Under the settlement nearly 21,000 Illinois residents could get some relief with their mortgages and a mandatory loan modification program will be established, to serve as a model for the federal government to help homeowners at risk for foreclosure the news release said..
"The primary goal of this lawsuit was to keep as many Illinois homeowners in their homes," Madigan said in the release. "As a result of this settlement, thousands of Countrywide borrowers in Illinois, and hundreds of thousands nationwide, now will be able to modify their loans and remain in their homes."
Illinois and several other states had filed suit against Countrywide Financial, the biggest subprime mortgage lender. The states charged Countrywide with fraud for giving mortgages the company knew homeowners would struggle to pay.
"Really what we've been able to do in a very short time is hold the largest mortgage lender in the country accountable for putting people in loans they knew were designed to fail," Madigan said.
Those people include special education teacher Melisa White of Schaumburg. Last June, she told reporters the terms of her mortgage changed, jumping 61 percent and forcing her to make some difficult choices.
"Going to the food pantry, deciding which medications I take and which I can't afford," White said then.
Bank of America, which now owns Countrywide, agreed to settle the case for $8.7 billion.
The funds from the settlement will be used to modify the loans to about 400,000 borrowers across the country, at a cost of about $8.4 billion. In Illinois alone, about 10,750 borrowers will receive $185 million in loan modifications, according to the news release. Bank of America will waive late fees, pre-payment penalties and loan modification fees.
Homeowners who have the so-called hybrid arms or pay-option adjustable rate mortgages are eligible.
"It benefits our whole entire economy if we keep loan payments being made by homeowners. It's a win all the way around," said Deputy Attorney General Deborah Hagen.
"This program will serve as a model for other lenders and the federal government because of its immediate and far-ranging impact," Madigan said. "Not only will thousands of Illinois borrowers be able to stay in their homes, but our communities and local governments will benefit by reducing the devastating impact that foreclosures have on local real estate values and taxes."
CBS 2's Jim Williams contributed to this report.
(© MMX, CBS Broadcasting Inc. All Rights Reserved.)
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