The country’s biggest subprime lender has announced an offer to refinance over 80,000 adjustable-rate mortgages, according to a story in USA Today.
Countrywide Financial plans to announce today that it will restructure or refinance $16 billion in adjustable-rate mortgages that have recently reset to higher rates or will reset by the end of next year, stretching some homeowners to the breaking point.
Its plan comes as the mortgage industry tries to head off mounting political and public pressure and an alarming foreclosure rate.
Countrywide, the nation’s largest mortgage lender, says its program will help about 82,000 borrowers, mainly those with “subprime” credit…
The plan would benefit Countrywide borrowers who:•Are in default on their loans because of an interest-rate reset in the past few months. Countrywide will send a letter offering to roll back their rate to the previous, lower level. Countrywide expects to modify 10,000 of these loans, totaling $2.2 billion, by the end of this year.
•Are likely to have difficulty affording an upcoming rate increase and are unable to refinance. Countrywide will modify the loan to a rate that will keep borrowers in their homes. The lender says it expects to modify 20,000 loans totaling $4 billion through the end of next year.
Those borrowers who fall behind because they’ve lost their jobs and lack enough income to keep up with a mortgage won’t qualify.
•Had subprime credit but have been making payments on time. Countrywide will offer to refinance them into a lower-interest “prime” loan, or a mortgage insured by the Federal Housing Administration, Fannie Mae or Freddie Mac. The lender estimates that about 52,000 borrowers would qualify for a new loan, and it expects to refinance $10 billion in mortgages.
These borrowers, however, will have to pay the fees to refinance their loans.
This looks like at least a partial victory for Cleveland’s ESOP and other community organizations who targeted Countrywide in a campaign for ARMS refinancing launched last month in Cleveland.
P.S. More national news, via Financial Week via an email from Jim Rokakis: Frank floats bill to set stricter standards for subprime mortgages; financial firms’ liability could increase.
Financial institutions that packaged “bad” subprime mortgage loans into complex structured investments and then sold them could be held liable for some of the losses in the credit market, according to legislation sponsored by Rep. Barney Frank (D-Mass.).
The bill, which is co-sponsored by Democratic Reps. Brad Miller and Mel Watt, both from North Carolina, sets stricter standards for what constitutes a “good” loan, requiring a greater chance of repayment and larger “tangible benefits.” For loans that did not meet such standards, borrowers would be able to recover twice the costs of the loan. Conventional loans would not be affected by the bill, Mr. Frank said today at the annual Association for Financial Professionals conference in Boston.