Massive Foreclosure Relief for California

Posted in Foreclosed House, October 9th, 2008 |

It is good news for over 120,000 foreclosure victims of California that a massive relief operation is on way. BofA or Bank of American Corporation will be providing $3.5 billion as loans for mitigation of the foreclosure crisis to settle the legal suits that it has taken over from Countrywide in July. Bofa also inherited its legal wrangles.

Behind this generous move is the reality of cases being filed by numerous states against Countrywide charging it of predatory lending. It is said that the mortgage company resorted to confusing advertisements and wrong business operations to cheat customers into contracting house loans that they could not afford. To settle the claims BofA will have to release nearly $8.4 billion as interest rate and principal reductions on over 400,000 mortgages across the country. In addition $200 million has been earmarked for those who have suffered or are in foreclosure.

Jerry Brown the Attorney General of California said, “Today, I’m announcing the biggest loan modification in American history. Bank of America settled because their new entity, Countrywide, was guilty of massive irregularities.”

This is the largest compensation ever to atone for predatory lending. It will be paling into insignificance a settlement of $484 reached with Household Finance Corporation in 2002.

Robert Gnaizda of Greenlining Institute has considered the settlement a beginning but nothing very extraordinary. The institute is an advocacy group that sees to the business interests of the low-income group. He skeptically commented that the bank is going ahead with these workouts apparently voluntarily but behind it is the hard truth that it wants to take advantage of the bailout programme passed last week and other measures. He also took to task the bank for not declaring a hold on foreclosures and for not streamlining counseling facilities for at risk borrowers.

BofA said that it would negotiate workouts with selected customers and modify their loans to fixed rate FHA loans. By it the bank would bring down the mortgage to 90% of the current worth of the house but the FHA would ensure return of the balance if the house went into foreclosure.

BofA personnel defended their stand by saying that their programme offered more solutions have been done before. It opens up great possibility of avoidance of foreclosure and keeping people in the houses that are their homes. The assurance was given that the bank would not proceed with foreclosures without first seeking out other positive alternatives.