Posted on 07 Oct 2008
Bank of America Corp said on Monday it would cut interest rates and principal on some troubled mortgages originated by Countrywide Financial Corp as part of a settlement with state attorneys general that could be worth as much as $8.6 billion.
Bank of America, which bought Countrywide in July, reached an agreement with state attorneys general in which it will offer more affordable and sustainable mortgage payments for borrowers who had financed their homes with subprime loans or adjustable-rate mortgages serviced by Countrywide.
The Countrywide settlement will likely become the largest predatory lending settlement in history, the California attorney general's office said in a statement.
"With this settlement, homeowners will receive direct relief from the catastrophic damage caused by Countrywide," California Attorney General Edmund Brown said in a statement. "Countrywide's lending practices turned the American dream into a nightmare for tens of thousands of families by putting them into loans they couldn't understand and ultimately couldn't afford."
States including West Virginia, California, Connecticut and Illinois had sued Countrywide over its business practices, alleging that the mortgage lender had made risky and costly loans to consumers who could not afford them.
Countrywide was once the largest U.S. mortgage lender before being acquired for about $4 billion in stock by Bank of America as its risky subprime mortgage loans began to fail.
"Since acquiring Countrywide in July, we have committed significant resources and developed innovative programs to help as many Countrywide customers as possible stay in their homes," Barbara Desoer, president of Bank of America Mortgage, Home Equity and Insurance Services, said in a statement.