Bank of America agrees to $8.6 billion deal on Countrywide loans
06 Oct 2008
Bank of America, the new owner of Countrywide, has agreed to a deal worth as much as $8.6 billion with attorneys representing customers of Countrywide to offer more affordable and sustainable mortgage payments for borrowers who had financed their homes with subprime loans or adjustable-rate mortgages earlier.
As part of a settlement with state attorneys general, Bank of America has agreed to cut interest rates and principal on some troubled mortgages to settle claims regarding certain risky loans originated by Countrywide Financial Corp, the Wall Street Journal said.
The deal reached with attorneys general representing 11 states, to be announced on Monday, would cover nearly 400,000 borrowers, the report quoted Bank of America spokesman as saying.
The deal would apply to borrowers who took out subprime loans with adjustable or fixed interest rates as well as those with option adjustable-rate mortgages, the paper said.
The cost will be split between the bank and investors who own securities that have mortgages originated by Countrywide or by third parties who sold those loans to Countrywide.
Bank of America has also agreed to, if possible, modify the terms of the loans and try to refinance borrowers into government-backed loans under the federal programme, which will require a cut in the principal, the report said.
In some cases, the interest rate would be lowered by as low as 2.5 per cent and then raising it over time, the report added.
The cost of the modification program ''have already been estimated and accounted for'' by Bank of America as part of its acquisition of Countrywide, the report quoted BoA spokesman as saying.
