BofA to help homeowners

Facing lawsuit, bank to modify loans

SPRINGFIELD, ILL. -- Facing a lawsuit over deceptive mortgage practices, Bank of America is agreeing to pay more than $8 billion to modify hundreds of thousands of loans to keep people from losing their homes.

Charlotte-based Bank of America said Monday that it will modify troubled mortgages with up to $8.4 billion in interest rate and principal reductions for nearly 400,000 customers of Countrywide Financial, the troubled mortgage lender it acquired last summer.

The agreement is expected to reduce the mortgage payments of more than 5,000 homeowners in North Carolina by $71 million, according to the North Carolina Attorney General's Office.

"Thousands of North Carolinians who are struggling to pay their mortgages and keep their homes will get relief thanks to this agreement," state Attorney General Roy Cooper said in a prepared statement. "Other mortgage companies need to step up to the plate with similar plans to help homeowners facing foreclosure."

The announcement arrived after the Illinois Attorney General's Office said Sunday that the bank was modifying loans for customers in 11 states. Illinois Attorney General Lisa Madigan and officials from California negotiated the settlement. Illinois and California sued Countrywide this year. Nine other states have also joined the settlement, and other states could sign on, said Deborah Hagan, chief of Madigan's Consumer Protection Division.

In California alone, the settlement will offer $3.5 billion in relief. For Illinois, that would translate to $190 million.

"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 in a statement Sunday.

Other states joining North Carolina, California and Illinois in the settlement are Arizona, Connecticut, Florida, Iowa, Michigan, Ohio, Texas and Washington.

Bank of America said it will launch the new mortgage aid program in December.

In a statement, Barbara Desoer, president of Bank of America's mortgage, home equity and insurance services, called the plan "a comprehensive program that provides more solutions than ever before to assist troubled borrowers and put them back on the path to sustained home ownership."

The mortgage aid includes revising customers' payments so they don't exceed 34 percent of income. Other options include reducing interest rates and adjusting principal so that borrowers don't wind up actually losing equity under some payment plans.

Countrywide will not charge loan modification fees and will waive prepayment penalties.

Madigan said she hopes the settlement could serve as a model for steps that other lenders could take to make up for misleading mortgage practices. She stressed that the agreement 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," Madigan said.