- This home retention program underscores Bank of America’s commitment to provide our customers the resources and necessary help to sustain homeownership.
- It is estimated that the loan modification program will result in permanent payment relief to as many as 400,000 Countrywide borrowers nationwide.
- In states participating in the program, it provides up to $150 million in relief payments to borrowers who default early in their loan terms or after an interest rate reset, while committing more than $70 million to a relocation assistance program to help borrowers who are unable to retain their homes with relocation costs.
- Countrywide has initiated proactive outreach to eligible borrowers.
Formalization of Existing Commitments
- We no longer offer “subprime,” “high cost” or “negative amortization” mortgages and have significantly curtailed no- and low-documentations loans.
- Broker compensation will be limited to 4% of the amount borrowed.
- Countrywide will retain, for at least one year following the acquisition by Bank of America, a minimum of 3,900 personnel to assist with loan modifications and other foreclosure avoidance and home retention measures.
- We will continue to proactively contact delinquent borrowers and offer loan modifications and report the progress of this agreement to the participating states on a regular basis.
Home Retention Programs
- On December 1, 2008, we began proactively contacting potentially eligible borrowers under this program.
- We have not initiated or advanced foreclosures for potentially eligible borrowers during the time necessary to determine borrowers’ interest in staying in their homes and their ability to afford the new terms as well as investors’ willingness to accept loan modifications.
- We will waive late/delinquency fees for payments remaining unpaid when modifying loans and will not charge modification fees to borrowers.
- We will waive prepayment penalties in connection with any payoff or refinance on certain qualifying subprime and Pay Option ARM loans owned by Bank of America or Countrywide. For loans owned by other investors, we will work with investors to encourage them to waive prepayment penalty fees.
Eligibility for Modifications
Eligible borrowers under this program must have received a qualifying subprime mortgage or a Pay Option adjustable-rate mortgage prior to 2008, and the property must be a 1-4 unit owner-occupied residential property. Additional requirements include:
- The borrower is 60 days or more delinquent and the current loan-to-value ratio is at least 75% or above;
- The borrower becomes seriously delinquent at any time prior to June 30, 2012, and the loan-to-value ratio at the time of the modification is 75% or above;
- The borrower is current on the mortgage but is likely to become seriously delinquent as a consequence of a rate reset or contractual payment recast based on negative amortization triggers, and the loan-to-value ratio at the time of the modification is 75% or above.
Loan Modification Program Details
We will offer eligible borrowers an FHA refinance under the HOPE for Homeowners Program to the extent available, as well as these additional program options based on product type:
Subprime 2-, 3-, 5-, 7- and 10-Year Hybrid ARM borrowers who become seriously delinquent following an interest rate reset will receive an unsolicited restoration of the introductory rate for five years and an invitation to contact Countrywide for additional relief if they are unable to afford the introductory rate. Pre delinquency rate relief may also be available based on investor approval. Borrowers who cannot afford the introductory rate reset will be offered one of the following streamlined loan modifications within the limits of the Affordability Equation:
- A fully amortizing loan modification with an interest rate reduction to the introductory rate or lower with fixed step-rate interest adjustments such that the borrower’s aggregate scheduled principal and interest payment increases by no more than 7.5% of the aggregate scheduled payments in the preceding year; and an automatic conversion after five years to a fixed rate mortgage for the remainder of the loan term.
- An introduction of a ten-year interest only period and a reduction of the interest rate on the mortgage with fixed step-rate interest adjustments such that the borrower’s principal and interest payment increases by no more than 7.5% each year, and subject to a lifetime interest-rate cap of 2% below the original loan’s contractual rate.
Pay Option ARM borrowers qualifying for and accepting a streamlined loan modification option will have the negative amortization feature eliminated from their loan. For single property owners who currently have an LTV of 95% or higher, Countrywide may defer or write-down the principal balance to as low as 95% of the current value of the property to restore an equity position. Based on the Affordability Equation, Countrywide will offer a fully-amortizing modification consisting of:
- An optional ten-year interest-only period on the loan; and
- Reduction of the interest rate with fixed step annual rate adjustments, subject to an interest rate cap.
Other Subprime borrowers will receive a streamlined modification based on the limits of the Affordability Equation consisting of a fully amortizing loan modification with:
- An optional ten-year interest-only period on the loan; and
- Reduction of the interest rate with fixed step annual rate adjustments, subject to an interest-rate cap.
- Foreclosure Avoidance Budget: The difference between the likelihood and severity of the investor’s projected loss in a foreclosure sale and the likelihood and severity of the investor’s projected loss in the event the borrower were to receive a loan modification and later experience a foreclosure sale.
- Affordability Criteria: To the extent permitted by the Foreclosure Avoidance Budget, borrowers will be offered a loan modification that produces a first-year payment of principal (if applicable), interest, taxes and insurance equal to 34% of the borrower’s income or as close to 34% of the borrower’s income as the Foreclosure Avoidance Budget permits without exceeding 42% of the borrower’s income. For those borrowers who do not escrow taxes and insurance, we will offer a loan modification that produces a first-year payment of principal (if applicable) and interest equal to 25% of the borrower’s income, or as close to 25% of the borrower’s income as the Foreclosure Avoidance Budget permits without exceeding 34% of the borrower’s income.
- Failure to Qualify under the Affordability Criteria: Borrowers in participating states who do not qualify under the Affordability Equation may be eligible for a payment under the foreclosure relief program and/or relocation assistance.
Foreclosure Relief and Relocation Assistance Programs
These additional programs are available to Countrywide borrowers in states participating in this agreement. Currently, they are available in the following states: Alaska, Arizona, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, Mississippi, Montana, Nebraska, New Jersey, New Mexico, Nevada, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Texas, Virginia, Washington, West Virginia, Wisconsin and Wyoming.
Foreclosure Relief Program
Countrywide has allocated up to $150 million nationally under a foreclosure relief program to provide relief for borrowers whose loans were originated directly by Countrywide (or through brokers) between 2004 and 2007. Funds will be allocated to each participating state based on the number of eligible borrowers in the state. To learn more about this program or to determine your eligibility, please contact Rust Consulting at 1.866.411.6987 or visit the Web site at www.countrywidesettlementinfo.com.
Relocation Assistance Program
Countrywide borrowers who experience a foreclosure sale of their property and who agree to voluntarily and appropriately leave the premises will receive a cash payment to ease their transition to a new place of residence. Countrywide anticipates paying greater than $70 million to more than 35,000 borrowers in participating states under this program.