Monday October 6, 05:57 PM
Bank of America to spend up to 8.4 billion on Countrywide
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WASHINGTON (AFP) - Bank of America (NYSE: IKJ - news) said Monday it was ready to spend up to 8.4 billion dollars to restructure the loan portfolio of mortgage giant Countrywide (LSE: CWD.L - news) following settlement of a lawsuit targeting the firm's "predatory" lending practices.
The bank (TBHS - news) said in a statement the program was designed to help borrowers who financed their homes with high-risk subprime loans serviced by Countrywide, which it acquired in July.
The announcement came after Countrywide Home Loans reached a landmark settlement with 11 states after being sued for "predatory" lending practices.
"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."
The statement said Countrywide deceived borrowers by misrepresenting loan terms, loan payment increases, and borrowers' ability to afford loans.
The California Attorney General's statement said the settlement was the largest predatory lending settlement in history, eclipsing the 484 million-dollar payout by the Household Finance Corporation in 2002.
The lawsuit against Countrywide was launched on June 30, prior to its acquisition by Bank of America.
Barbara Desoer, president of Bank of America's mortgage, home equity and insurance services, said the restructuring of the loan portfolio would "put borrowers back on the path to sustained home ownership."
Bank of America serves more than 59 million consumers and small businesses in the United States and has more than 6,100 retail banking offices in the country.
Countrywide's woes at the time of its purchase reflected the troubles of the overall US housing market and the lender is exposed to losses in the subprime mortgage market, which catered to borrowers with weak credit histories.
Last October, the company posted its first quarterly loss in 25 years amid surging mortgage defaults.
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