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Texas Launches Restitution Program for Countrywide Customers

More than $7 million available to Texas foreclosure victims

February 13, 2009

Though the state’s 2008 agreement with Countrywide will provide $345 million in total benefits to Texas homeowners, the restitution announced this week is specifically set aside for Countrywide customers who lost their homes to foreclosure.

Last year, the attorney general initiated an investigation into allegations that Countrywide encouraged homeowners to accept loans they could not afford, failed to fully disclose risky loan terms to borrowers, and wrote loans for unqualified borrowers in an effort to increase market share.

“The restitution program announced today provides financial assistance to Countrywide customers who lost their homes,” Abbott said. “Last year we investigated Countrywide and reached a sweeping agreement that included loan modification opportunities for nearly 30,000 Texas homeowners. With today’s announcement, we are implementing the final portion of our agreement and making restitution funds available to Texans whose homes were lost to foreclosure.”

The state’s settlement with Countrywide included the following:

• $7.46 million in restitution for Countrywide’s Texas customers who lost their homes to foreclosure--or whose payments were 120 days behind as of October 6, 2008;

• $335 million in loan modifications for about 30,000 Texans; and

• About 1,400 Texans who are in default – or are likely to be in default – on their subprime mortgages and who “voluntarily and appropriately” turn over their residence in the “Relocation Assistance Program,” are eligible to receive up to $2,000. The Relocation Assistance Program is expected to provide $2.8 million in benefits to Texas homeowners.

Under the agreement’s home loan modification program, eligible home owners can modify the terms of their residential loans so that monthly mortgage payments are more affordable. Modified loan terms will vary according to each home owner’s circumstances. The potential modifications include interest rate freezes, interest rate reductions, loan term extensions, conversions from variable to fixed rate loans, and principal reductions.

Eligible borrowers who participate in the program will not be charged late fees, loan modification fees, foreclosure fees, or pre-payment penalties.

Bank of America, which acquired Countrywide last year, will distribute to eligible homeowners program application forms. Texans who believe they may be eligible for the loan modification program should visit Countrywide.com or call (800) 669-6607.

Maryland agreement

Earlier this month, Countrywide Financial entered into a settlement with the State of Maryland, resolving charges stemming from the company's loan origination practices.

Under the Consent Judgment and Permanent Injunction, Countrywide will, consistent with a program previously announced by Countrywide's new owner Bank of America, offer loan modifications and relocation assistance to certain borrowers who are unable to retain their homes. Countrywide will also pay more than $2.1 million to Maryland borrowers as a part of a foreclosure relief program.

The complaint alleges that Countrywide engaged in unfair and deceptive business practices that placed consumers in risky, high-priced, and ultimately unaffordable mortgage loans. According to the Complaint, Countrywide enticed consumers with low teaser rates, low monthly payments and "no closing cost" loans that failed to adequately disclose the loans' costs or risks.

The state's investigation and the allegations contained in the complaint involved loan origination practices that allegedly were employed prior to Countrywide's purchase by Bank of America. Countrywide denied having engaged in any illegal practices.

"Today's announcement means eligible homeowners in Maryland will be able to stay in their homes," said Maryland Attorney General Douglas Gansler.

The loan modification program contained in the Consent Order is consistent with the nationwide loan modification program announced by Bank of America in October. The qualifying mortgages consist of subprime hybrid adjustable rate mortgages, pay option adjustable rate mortgages, and other subprime mortgages.

Homeowners eligible for loan modifications will be notified by Countrywide. Marylanders eligible for foreclosure relief will also be notified, the Attorney General said.

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