Hub group, Countrywide in deal
Nonprofit will restructure some borrowers' loans
Boston housing activist Bruce Marks has persuaded Countrywide Financial Corp., the nation's largest mortgage lender, to let his nonprofit reengineer some of its least affordable loans.
Neighborhood Assistance Corp. of America will calculate how much overwhelmed borrowers can afford to pay each month, and Countrywide will alter loan terms accordingly.
Countrywide hopes to salvage some return on loans that might otherwise default, and it gets someone else to handle the work. NACA will get a small fee. Borrowers get a second chance.
The agreement, which will be disclosed today in Washington, D.C., covers any Countrywide customers who can demonstrate their monthly payments are unaffordable. It is not clear how many people NACA will help.
Marks said Countrywide officials asked to meet with his organization after the nonprofit staged a series of its trademark protests early this month, sending borrowers into Countrywide offices in Boston and Brookline. The two sides opened negotiations Sunday morning, adjourned at 4 a.m. Monday, returned to the table at 7 a.m., and reached a deal shortly be fore midnight, Marks said.
"The only way to have a soft landing on this crash is to restructure people into payments that are affordable over the long term," said Marks, NACA's chief executive. He said he hoped the agreement with Countrywide would create a model for other lenders. "They've always been ahead of the curve, sometimes for good things and sometimes for not-so-good things. Now they are setting the standard" for helping borrowers.
Separately, Countrywide said yesterday it will offer three kinds of direct assistance to customers. The direct help in general is more modest, aimed at customers who are more able to afford their loans. Customers who receive direct assistance can still turn to NACA for additional help if necessary.
The company will offer fixed-rate loans to about 80,000 customers with adjustable-rate loans who face an imminent increase in their monthly payments - basically freezing the payments at a level the customer can afford.
In another 20,000 cases, Countrywide said it would offer to modify loan terms for customers who cannot refinance to a fixed-rate loan. That often occurs because the value of their property is less than the outstanding loan balance, and they lack the savings to pay the difference.
Finally, for about 10,000 borrowers whose loans have already adjusted to higher rates and who are behind on payments, Countrywide said it would unilaterally reduce the interest rate by year-end.
In total, the efforts include $21 billion in outstanding loans, Countrywide said.
"Unprecedented times call for unprecedented remedies," David Sambol, Countrywide's president, said in a statement. "We are determined to assist borrowers who have the willingness and wherewithal to remain in their homes."
The California company has become a target for critics of the mortgage industry because it makes more loans than anyone else. Countrywide originated more than 2.5 million loans in 2006 and more than 2.7 million loans in 2005. About 10 percent were subprime loans, which generally carry adjustable interest rates. It is not clear how many of those roughly 500,000 customers are in danger of losing their homes.
Countrywide did not return several calls seeking comment. Marks said company officials would appear at a news conference to unveil the agreement today. Countrywide stock was down 63 cents, or 4 percent, to close at $15.05 yesterday.
NACA will rewrite loans in much the same way that bankruptcy courts calculate how much debtors can afford to pay each month. The nonprofit will take a borrower's post-tax income and subtract from it recurring expenses, $200 a month for sundry expenses, and the actual amount the borrower spends on property taxes and homeowner's insurance. What remains is the money available for a mortgage payment.
In most cases, the loans that Countrywide services are owned by investors. The company has promised to seek permission from those investors to modify the loan terms so borrowers' monthly payments are no more than the maximum NACA says they can afford. If the borrower makes the new monthly payments for six months, Countrywide will replace the old loan at the new monthly payment.
NACA has already hit the reset button on about 25 Countrywide loans since the program had a soft launch this week, Marks said.
Among the early beneficiaries was Dina Allen, who was on course to lose her Dorchester home. Allen makes about $4,700 a month as an inspector for the MBTA, and by renting part of her home. In 2005, she refinanced into two mortgages with combined initial monthly payments of $1,800. By the spring of 2007, the interest rates on her adjustable loans had reset higher, pushing the combined monthly payment to $3,700. And it was about to rise again. Allen, who said she felt "a little stupid" for taking the loan, was about to lose her home.
Countrywide offered to reduce Allen's monthly payment to about $3,100, still more than she could afford. A friend put her in touch with NACA, which calculated she could afford a maximum monthly payment of $2,500. On Monday night she learned that Countrywide had agreed.
"It's truly a miracle," Allen said. "I stayed hopeful, but I felt that I was going to lose my home."
NACA has offices in 33 cities, but it employs only 10 underwriters, who also handle applications for the nonprofit's existing-loan programs. Marks said he is hiring new people.
Binyamin Appelbaum can be reached at bappelbaum@globe.com. 