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Bank of America modified 50,000 loans in Countrywide settlement
May 26th, 2009
Bank of America Corp. has
modified mortgages for more than 50,000 borrowers as part of a
predatory-lending settlement brought by
Under the terms of the
agreement which covers 390,000 borrowers, Bank of America agreed to, where
possible, modify the terms of certain subprime mortgages and option
adjustable-rate mortgages serviced by Countrywide, which was acquired by Bank
of America last year.
The report covers
modifications offered or made between December of 2008 and March 2009.
Forty-two states have signed on to the settlement. Bank of America announced
that reductions in principal and interest could save borrowers or homeowners
as much as $8.4 billion.
Bank of America did not admit
any wrongdoing. Attorneys general in a number of states including
Borrowers with an option ARMs, which allows borrowers to make a minimum payment that
may not even cover the interest due and can lead to higher loan balance,
benefitted the most as they received the biggest savings after the
modifications. According to Bank of America, these borrowers experience an
average savings of $311 per month. In addition, some 11,000 borrowers and
tenants who didn�t qualify for a loan modification have received
relocation help at an estimated value of $22.4 million.
This move has drawn criticism
from investors of securities backed by Countrywide
mortgages. They are accusing Bank of America of shifting the cost of the
settlement to them. Bank of America currently owns about 12% of the loans at
issue in the settlement. An investor lawsuit involving Bank of America and Countrywide
regarding who should take burden of the cost of modifications is currently
pending in U.S. District Court for the Southern District of New York.
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