Bank of America agrees to modify mortgages

[depakid]

Source: The Oregonian

Facing a lawsuit over deceptive mortgage practices, Bank of America has agreed to modify tens of thousands of loans to keep people in Illinois, Washington and nine other states from losing their homes, the Illinois attorney general's office said Sunday.

Borrowers stuck with mortgages they can't afford could see their interest rates reduced or have the loan principal cut. Some might qualify for having to pay nothing but interest for a decade. Even people who can't afford to keep their homes even with such changes will be able to get help moving to a new home.

"This is going to provide a tremendous amount of relief," said Illinois Attorney General Lisa Madigan. Her office and officials from California negotiated the settlement. Nine other states have also joined the settlement, and other states could sign on, said Deborah Hagan, chief of Madigan's Consumer Protection Division.

If every state were to join, the settlement could provide $8.7 billion in relief to 400,000 borrowers, Hagan said. In California alone, the settlement will offer $3.5 billion. For Illinois that would translate to $190 million to about 10,000. The settlement applies to people who obtained their mortgages through Countrywide Financial Corp., which Charlotte, N.C.-based Bank of America purchased in June, at the same time Illinois and California sued the company

Read more: http://www.oregonlive.com/news/index.ssf/2008/10/bank_of_america_agrees_to_modi.html

[grasswire]

1. this bears watching

whoever heard of a bank giving a customer a break?

[Bluebear]

2. >>>>>>The settlement applies to people who obtained their mortgages through Countrywide

Excellent. Predators.

[Waiting For Everyman]

3. That's what Congress needs to do for everybody.

Make it uniform - across the board.

[depakid]

6. That's a possibility

though it's also possible that they may not need to:

Madigan said she hopes the settlement could serve as a model for steps that other lenders could take to make up for misleading mortgage practices. She stressed that the agreement involves no tax money but will help people keep their homes and keep money flowing to lenders.

"This settlement will help homeowners stay in their homes, which ultimately helps investors and also helps communities," said Madigan, a Chicago Democrat.

[cstanleytech]

18. No, not everybody.

Only people and or couples who own one home and who earn less than 250,000 a year, anyone who owns more than one house or makes more then 250,000 can damn well bail themselves out.

[Waiting For Everyman]

29. Right, that's what I meant (almost as a 'given').

[Javaman]

35. Let's hope this becomes an industry wide trend...

I have been writing about just such a fix for the last two years and I got shot down left and right by many of the "fuck those people who screwed up" crew.

it's a truly sad state of affairs that it takes a bank to figure out what needs to be done then our mouth breathing elected officials.

we live in some truly fucked up times.

[cstanleytech]

36. I know the feeling, I've gotten the same treatment when I suggested it on another forum.

[JeanGrey]

37. Gee I so wish the government was around to reduce my

principal or my interest rate in 1979 when we were struggling to make a 10.75% interest loan.

[dipsydoodle]

22. That would have been implicit in the alternative,

which on one of the guys at Forbes proposed, to the bailout.

[BlooInBloo]

4. Nice! At a quick read, sounds like a good deal. Esp. the removal of prepayment charges.

[aquart]

11. Do you mean points? Wish they did that for student loans.

[BlooInBloo]

13. I don't know what "points" means.

[femmedem]

23. Points are a percentage of the total mortgage.

Lenders typically charge a fee of several points, due at the time of closing. People usually have to pay points when they refinance, as well.

[intheflow]

31. God, me too!

I have $70K in student loans but cannot work in my specialized field any longer for health reasons. That's $70K just for my master's degree--thank God my undergrad loans were paid off by the time I hit grad school! Of course, the work I want to get into now requires another specialized graduate degree, and the only local university offering the program will cost... $70K. x(

[dkf]

5. I would like to know exactly what deceptive practices were used.

Why do they never detail these things?

[Mind_your_head]

7. Why do they never detail these things?

Because the TRUTH would be too ugly!

That is why.

M_Y_H

[depakid]

8. LIsa Madigan lists them in her press release here:

http://www.illinoisattorneygeneral.gov/pressroom/2008_06/20080625.html

For more detatil, you can peruse the State of California's complaint here:

http://ag.ca.gov/cms_attachments/press/pdfs/n1582_draft_cwide_complaint2.pdf

[dkf]

16. Perfect...thanks.

[Bluebear]

10. A taste here:

Originating mortgage loans that borrowers could not afford;
Relaxing certain underwriting guidelines, particularly through the company’s reduced documentation loan program, dramatically increasing the risk that borrowers would be unable to pay;
Originating mortgage loans that exposed borrowers to an unnecessarily high risk of foreclosure or loss of equity, particularly through risky products like pay option ARMs;
Originating unnecessarily costly loans to borrowers;
Engaging in unfair and deceptive marketing and advertising practices to lure borrowers into risky loans;
Incentivizing employee and broker misconduct and the use of unnecessarily costly and risky loan products; and
Engaging in deceptive practices in the servicing of mortgage loans, resulting in greater risk of foreclosures.

http://www.illinoisattorneygeneral.gov/pressroom/2008_06/20080625.html

[dkf]

17. That is a list of incredibly stupid behavior.

I wonder if there is a way to keep originators responsible for defaults even if they securitize them.

Then again, in an age of do what feels good today, even that might not help.

In retrospect, this is also responsible for the incredible rise in the cost of housing. What a double whammy for our economy to endure.

[gopbuster]

9. I wonder how they are doing this.....

How are these loans untethered from the MBSs? Do they own the MBSs? Since these are all Countrywide were these mortgages not exposed to MBSs?


Interesting

I will look forward to hearing more details

****PDF**** http://www.law.georgetown.edu/faculty/levitin/documents/MBSModificationIssues_000.pdf

I think it's great if they can do it

[depakid]

15. What a byzantine mess. Looks like it will require a ton of releases and waivers

plus changes to the tax code to accomplish this.

I also agree with the author that a change in the Bankruptcy code is necessary. Yesterday.

It should have been part of the package passed on Friday- and probably could have been, if more Democrats had gotten on board.

Only bankruptcy law changes can require the trust to go along with a loan modification and deal with the junior lien problem. Already Chapter 11 bankruptcy is used for the same effect. Because of the Trust Indenture Act, it is very difficult to engage in a consensual modification of corporate bonds.

As a result businesses that need to restructure their bonds often find it necessary to do in bankruptcy. Amending the Bankruptcy Code to permit modification of all mortgages would also make voluntary modifications more likely, because a trust could defend any lawsuit by asserting that the borrower could have gotten the same deal (or one less favorable to the trust) in bankruptcy. Thus, permitting bankruptcy relief may well cause it to be unnecessary in many cases.

[gopbuster]

26. We'll see if they end up needing to do this (bankruptcy laws).....

this post below says that, basically if I read it right, that they are trumping lawsuits from the pool holders by getting the state Attorney Generals to sign off on the deals.

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=3528637&mesg_id=3528679

Sounds like it could be a win,win,win

[Trajan]

12. This is the approach that makes sense ...

The Righties will hate it (unless it helps them personally, then they will just shut up), but I think it is a good model ... Perhaps Obama can adopt and promote these ideas ....

[TreasonousBastard]

14. There's a backstory here...

a number of mortgagors had already thought about reducing the more onerous terms of many mortgages, but were afraid of lawsuits from the derivitive holders.

A suit from an AG tends to trump a suit from vulture funds, so I suspect BoA was very amenable to most of the terms of the agreement-- it means they can continue to get payments and build customer loyalty rather than force foreclosures and don't have to worry about lawsuits coming in the back door.

A win-win overall if it holds up.

[gopbuster]

24. That is why they said they are getting the "states" to sign up

I was wondering

[ORDagnabbit]

19. we all better get a cut or Ihe public will rise up and start burning banks.... n/t

[Mind_your_head]

20. What you said! n/t

[newtothegame]

21. thanks n/t

[Robbien]

25. A whole year after the crisis began they finally, grudgingly agree to modify loans

What a crock.

Only after almost every state in the union sued them did they even consider removing the predatory parts of the mortgages they fraudulently issued.

What good guys they are.

[TreasonousBastard]

27. This is what happens when you sound off...

before reading the whole thread.

[Robbien]

28. Derivative lawsuits are a handy excuse

Banks who put out these fraudulent loans really are nice guys who really really wanted to take back all their predatory actions and give up all their profits, but they were scared of being sued.

Yeah, right. That's believable.

[TreasonousBastard]

32. Believable to me since I saw it mentioned...

several times over the past few months, Usually buried deep in the parts of articles most people don't read.

Besides, I've been there-- for twenty years or so I was constantly making decisions with the thought of lawsuits in the background. Far too often doing the right thing would have been too expensive when the lawyers got their fangs into it.

[Robbien]

33. I understand that is your belief

But others have other opinions. When others post their differing opinions, they are not just "sounding off" or being ignorant or being slipshod or lazy by "not reading the thread", they are posting their opinions which may differ from your stated belief.

[TreasonousBastard]

34. And on what do they base those "beliefs"? Why should I...

believe them more than my own lying eyes?

That's the problem with everyone sounding off (even me, I do it too). Most of the time nobody has any idea who actually has knowledge, or is just spouting off. And spouting off, particularly on an abstact subject, is what people tend do when they have little to offer in substantive discussions.

[gopbuster]

41. Here we go:

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x4180784

[gopbuster]

38. The way the MBS bundle contracts are written is that the

Mortgage servicer or holder cannot modify the mortgages without the owner or owners of the MBS pool or bundle to vote or give permission to rewrite the mortgages i.e. the physical mortgages are tethered to the MBS. So I was wondering how they were going to do this legally. He may be right in that by getting the Sate AG's involved this is how it will be done. My only other thought is BOA may have owned a good percentages of the MBS on the mortgages that Countrywide held.

This article explains a little about it and I'm sure there are other articles if you google as well

http://www.creditslips.org/creditslips/2008/09/what-does-it-ta.html

[gopbuster]

40. This is how they trumped the MBS contracts...the AG's forced their hand

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x4180784

[gopbuster]

39. See post :

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=3528637&mesg_id=3530843

I'm not sure this was clear

[sarcasmo]

30. Am I the only one who thinks Banker= Criminal?