Bank of America acquired Countrywide on July 1. The program is designed to resolve claims that several state attorneys general had filed against the Calabasas, Calif., mortgage firm.
The program applies to mortgages serviced by Countrywide and originated before Dec. 31, 2007.
The target borrowers are those who occupy their homes as their principal residences and "who are seriously delinquent or are likely to become seriously delinquent as a result of loan features, such as rate resets or payment recasts," Bank of America said.
Option ARM mortgages enabled borrowers to pay only minimal amounts at the start of the loans. But those initial payments often didn't cover even the interest that was due, and the loan balances then ballooned.By Dec. 1, Countrywide staff will begin contacting eligible customers. B of A said it would not begin or advance a foreclosure sale for a borrower who is likely to qualify for the program until Countrywide decides whether the borrower is indeed eligible.
The bank said it would modify the loans via a number of methods, including:B of A said Countrywide wouldn't charge the borrowers any fees to modify the loans, and it will waive prepayment penalties for subprime and pay-option ARM loans.
This deal will only affect a relatively small number of homeowners, but it is a start. Perhaps this will spur other banks to cut similiar deals with homeowners before more stories like this one happen.
