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Bill Healy/MEDILL

Under the terms of last week's settlement with the Illinois Attorney General, Bank of America has agreed to refinance the loans of roughly 11,000 Illinois borrowers.

Concerned homeowners clamor for Countrywide settlement details

by Bill Healy
Oct 16, 2008

More than 1,200 phone calls from anxious homeowners have flooded the Illinois attorney general’s office since last week’s announcement that the nation’s biggest mortgage lender agreed to refinance the home loans of roughly 11,000 Illinois borrowers and 400,000 nationwide.

“This settlement holds the No. 1 mortgage lender in the country accountable for deceptively putting borrowers into loans they didn’t understand, couldn’t afford and couldn’t get out of,” Lisa Madigan, the attorney general, said in announcing the settlement last week. “These are the very practices that have created the economic crisis we’re currently experiencing.”

Meanwhile, the lender – Countrywide – is busy preparing its staff for the coming storm, updating computer systems and educating staff about the terms of the settlement to keep customers in their homes.

Countrywide’s agreement with Illinois and the attorneys general of at least 10 other states puts an end to a lawsuit accusing the lender of deceitful practices regarding sub-prime mortgages.

Under the settlement, people with certain types of loans from Countrywide are possibly eligible to get help refinancing if they meet four criteria.

Loans affected include those that are subprime or certain adjustable-rate held by people who live in the home on which the note is written, received between Jan. 1, 2004, and Dec. 31, 2007. The fourth criteria is that homeowners are either behind in payments or are at risk of falling behind.

Before any of that can happen, however, looming in the distance is a Dec. 1 deadline under which Bank of America, Countrywide’s new owner, must comply with the terms of the settlement.

“On Dec. 1 Bank of America/Countrywide will begin communicating with borrowers on their eligibility and working with them on gathering income information toward their modification of their home loans,” said Robyn Ziegler, a spokeswoman for Illinois Attorney General Lisa Madigan.

Countrywide representatives will begin contacting homeowners as soon as the company’s internal structure is in place, Bank of America spokesman Rick Simon said.

Simon suggested that bank representatives will begin calling, emailing and mailing letters to loan holders before the Dec. 1 deadline if possible.

Bank of America/Countrywide, Simon added, has 5,000 employees working to keep people in their homes, twice as many as 18 months ago.

Madigan said, “This program will serve as a model for other lenders and the federal government because of its immediate and far-ranging impact.”

Madigan sent a letter along with 11 other attorneys general to 16 of the largest lenders or servicers “to outline what we’ve been able to achieve through the Countrywide settlement and showing them the benefits of doing this,” Ziegler said.

In addition, under the settlement, Ziegler said that roughly 5,000 Countrywide mortgage holders in Illinois who have already lost their homes may be eligible for financial assistance.

The settlement also stipulates that the attorney general will work closely with Countrywide to monitor the status of loans, Ziegler said.

Neighborhood foreclosure prevention experts agreed that refinancing these homeowners and keeping them in their homes will be a step forward.

“If you can knock those out it really will make a dent,” said Mike van Zalingen, director of homeownership services for Neighborhood Housing Services of Chicago, which works with homeowners with looming foreclosures.

“That’s less depreciation for neighborhoods, fewer houses on the market, fewer families with credit destroyed.”