Attorney general John Suthers announced today that he has secured a commitment by the nation's largest mortgage lender to provide $6 million to help distressed homeowners avoid foreclosure.
The agreement, which settles a lawsuit alleging that Countrywide engaged in deceptive trade practices when it convinced borrowers to agree to loans that included low introductory rates that quickly rose and dramatically increased payments, was approved by a Denver District Court judge Feb. 3.
"Under the settlement agreement, Countrywide will also help borrowers who are in default or facing foreclosure to save their homes through fast-track loan modification of sub-prime or option-ARM loans, resulting in reduced mortgage payments," Suthers said. "The program offers a series of loan modifications, including lowering the interest rate as low as 3.5 percent for five years to make house payments more affordable. Alternatively, Countrywide can make loans interest-only for up to ten years."
The announcement this morning also said that about 6,800 Colorado homeowners are expected to benefit from it.
Suthers said the deal includes provisions that would require Countrywide to waive some late fees and pre-payment penalties worth at least $2.1 million.
"Borrowers that do not qualify for loan modification under the settlement, or who previously went into default and lost their homes to foreclosure after only a few payments, may be eligible to receive compensation under the settlement," Suthers said.
The money paid by Countrywide also includes $500,000 for the state's Division of Housing. It will be used to expand efforts by the Foreclosure Hotline to reach out to homeowners at risk of losing their homes.
Suthers said Countrywide has already begun contacting borrowers to determine if they are eligible for a loan modification under the settlement.
"The settlement agreement requires Countrywide to complete the modification for a borrower within 60 days after the borrower provides income information," Suthers said. "During this time, any foreclosure proceedings are suspended. In addition, Countrywide will write off late fees and waive prepayment penalties on modified loans."
The terms of the settlement required Countrywide to establish a special fund of an additional $1.2 million to help homeowners affected by the practices alleged in the complaint to relocate. There is also a separate fund of approximately $4.4 million that is to be used to pay about 1,180 Colorado homeowners who could make six or fewer payments before they could no longer afford their loans.