For many, Countrywide Financial is the poster child for predatory lenders. Their abuses were so egregious that in June, a lawsuit was filed against them for making bad loans. Soon after the filing, Countrywide was acquired by Bank of America.
Today, in order to settle this lawsuit, Bank of America announced that it would spend up to 8.4 billion dollars to restructure Countrywide's loan portfolio. In a statement, the bank said the program is intended to benefit those borrowers who "financed their homes with subprime loans or pay-option adjustable-rate mortgages serviced by Countrywide and originated prior to Dec. 31, 2007."
Starting December 1, counselors will begin a proactively outreach to customers that could result in interest rate and principal reductions for nearly 400,000 Countrywide customers nationwide. In addition, foreclosure sales will be temporarily frozen for those borrowers who are likely to qualify for the program.
"With this settlement, homeowners will receive direct relief from the catastrophic damage caused by Countrywide," California Attorney General Jerry Brown said in a statement. "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."