Bank of America Corp. has agreed to provide up to $8.4 billion to modify troubled mortgages it bought as part of its purchase of Countrywide Financial Corp. in July.
The program is part of a settlement with attorneys general in several states, including North Carolina Attorney General Roy Cooper. The AGs filed lawsuits against Countrywide accusing the mortgage lender of deceptive and misleading practices that led to borrowers obtaining potentially risky and costly loans.
BofA says it the mortgage program will provide up to $8.4 billion in interest rate and principal reductions for nearly 400,000 Countrywide customers nationwide. It is designed to achieve affordable mortgage payments for Countrywide borrowers who financed their homes with subprime loans or pay-option, adjustable-rate mortgages before Dec. 31.
In North Carolina, Cooper said in a statement Monday, the agreement is expected to provide $71 million in reduced mortgage payments to some 5,000 borrowers.
The program is slated to launch by Dec. 1.
Charlotte-based BofA (NYSE: BAC) says foreclosure sales will not be initiated or advanced for borrowers likely to qualify for the modifications.
“We are confident that together with the attorneys general we have developed a comprehensive program that provides more solutions than ever before to assist troubled borrowers and put them back on the path to sustained home ownership,” Barbara Desoer, president of BofA’s mortgage, home-equity and insurance services, said in a written statement.
BofA says first-year payments of principal, interest, taxes and insurance will be targeted to equate to 34 percent of the borrower’s income. BofA won’t charge loan-modification fees and will waive prepayment penalties for subprime and pay-option ARM loans. The program includes $150 million for customers who suffered foreclosure or are currently at serious risk of foreclosure after having made only minimal payments.
An additional fund of up to $70 million will support customers facing imminent foreclosure.
Paul Wickstrom