Countrywide deal offers hope for homeowners

Hundreds of troubled Countrywide mortgage holders in Manatee, Sarasota and Charlotte counties could qualify for relief under a $1 billion settlement announced by Florida officials on Monday.

Some will be able to move from subprime loans and adjustable-rate mortgages into fixed-rate, fully amortizing loans that they can afford.

Bank of America, Countrywide Financial Corp.'s new owner, also said that some borrowers might qualify to pay nothing but interest for a decade.

People who cannot afford to keep their homes even with those kinds of changes will be able to get help moving to new ones.

Florida's share of the settlement will affect 57,000 homeowners, Florida Attorney General Bill McCollum said Monday.

It is unclear precisely how many people in Manatee, Sarasota and Charlotte counties will be helped, but Countrywide was a big player in the region.

Data from California-based RealtyTrac Inc. covering the period from January 2007 to April 2008 showed that Countrywide ranked third for foreclosure actions in the three counties, behind only Wells Fargo and Chase Manhattan. Countrywide loans became the subject of foreclosure nearly 500 times, with about half of those taking place in Sarasota County.

One mortgage expert said Bank of America's move was in the right direction.

"If it can take some fear out of the marketplace and get people in the mode to buy again, then that's a great thing," said Frank Fontanetta, president of Sarasota's Sentinel Mortgage Co. "It could potentially turns things around."

The settlement comes on the heels of the congressional vote Friday to enact the Emergency Economic Stabilization Act, which is to enable the Treasury Department to buy $700 billion worth of troubled assets from financial companies so they can begin lending money again.

But the effort by Charlotte, N.C.-based Bank of America comes at the mortgage mess from the other end, noted economist Sean Snaith, director of the University of Central Florida's Institute for Economic Competitiveness.

"This is approaching the individual mortgage holder as opposed to the securities that backed those mortgages," Snaith said. "It certainly could help."

Snaith was quick to add that the results will be somewhat paltry in terms of depleting the huge pool of foreclosures in the market.

"Any steps to help the foreclosures inventory from swelling is a good thing," Snaith said. "But its magnitude will not solve the larger foreclosure problem."

Snaith also questioned how Bank Of America will distinguish the bona-fide homeowner in true need of help from the investors or "flippers" who got caught in the post-boom housing crash and are now having trouble keeping up with payments on a home they never intended to live in.

Fontanetta agreed: "The big issue is how do you segregate out people who were the investors -- out to make a quick buck -- with those who truly bought the homes and planned to live in them for the next 10 to 15 years," he said.

Part of national settlement

The national settlement, totaling $8.4 billion and affecting 400,000 mortgage holders, stems from a suit that Florida filed against Countrywide just as Bank of America was taking it over. Ten other states filed similar suits, claiming that Countrywide engaged in a host of deceptive loan practices.

"This is a broad-reaching settlement," McCollum said Monday from Orlando. "We expect a lot of people's homes will be saved."

Most of those who will be eligible for help were either sold sub-prime mortgages, moved unknowingly into adjustable-rate loans or were given loans they should not have qualified for given their income level, McCollum said.

Bank Of America's plans, which kick off in December, include revising customers' payments so they do not exceed 34 percent of their income.

Foreclosures on the affected loans will be halted between now and December.

Other options include reducing interest rates and adjusting principal so that borrowers do not wind up actually losing equity under some payment plans.

Loan modification fees will be canceled and prepayment penalties waived.

Illinois and California sued Countrywide this year and were later joined by Florida, Arizona, Connecticut, Iowa, Michigan, North Carolina, Ohio, Texas and Washington.

"Countrywide's lending practices turned the American dream into a nightmare for tens of thousands of families by putting them into loans they couldn't understand and ultimately couldn't afford," California Attorney General Jerry Brown Jr. said.

Illinois Attorney General Lisa Madigan said she hopes the national settlement could serve as a model for steps that other lenders could take to make up for misleading mortgage practices.

Madigan stressed that the agreement -- unlike Friday's congressional bill -- 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," she said.

Information from The Associated Press was used in this report.