Florida homeowners to get $1B under Bank of America settlement

Oct 7, 2008

Tampa Bay Business Journal--October 6, 2008

by Margie Manning Senior Staff Writer

Bank of America Corp. will provide up to $8.4 billion to modify troubled mortgages it acquired 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 Florida, who filed lawsuits against Countrywide accusing the mortgage lender of deceptive and misleading practices that led to borrowers to obtaining potentially risky and costly loans.

BofA said the mortgage program will provide 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.

The agreement has three components, Florida Attorney General Bill McCollum said during a press conference.

The first part is focused on home retention. The bank will launch a loan modification program for qualifying borrowers, moving them into fixed-rate, fully amortizing loans that they can afford. The bank said first-year payments of principal, interest, taxes and insurance will be targeted to equate to 34 percent of the borrower’s income.

About 52,000 Florida borrowers are expected to receive a loan modification under this plan, and “we expect a lot of homes will be saved because of this,” McCollum said.

The second part is designed to provide foreclosure relief. The bank will make cash payments to eligible individual borrowers who lost their homes to foreclosure after experiencing an early payment default or after an interest rate reset, which are indications the loan was not properly written, a release from McCollum’s office said. About $150 million will be available nationwide with more than $20 million earmarked for Florida borrowers.

The third part provides up to $4 million in Florida and $60 million nationwide for relocation assistance for borrowers in foreclosure who voluntarily agree to leave their home at the time of the foreclosure sale.

The program is slated to launch by Dec. 1. Until then, foreclosure sales will not be initiated or advanced for borrowers likely to qualify for the modifications, said Liz Ferrer, Bank of America’s Florida president.

Florida filed suit against Countrywide on June 30, one day before its acquisition by Charlotte, N.C.-based Bank of America (NYSE: BAC).

The state lawsuit also named Angelo Mozilo, the former chief executive of Countrywide, as a defendant. McCollum said Mozilo remains a defendant in that suit.