A subprime settlement
Looks like the appropriate parties may be starting to pay for the subprime mortgage mess.
Eleven states, including those hardest hit by foreclosures, have struck an agreement with Countrywide Financial that will offer assistance to distressed homeowners, according to the
New York Times. To settle lawsuits accusing it of predatory lending practices, Countrywide will provide $8.4 billion in direct loan relief to borrowers in those states who were placed in the riskiest loans. Countrywide has also agreed to waive some late fees and prepayment penalties, and will offer help to homeowners who are already in foreclosure, which may include help moving to a rental unit.
The states involved are California, Arizona, Florida, Connecticut, Iowa, Illinois, Michigan, North Carolina, Ohio, Texas, and Washington.
Though Countrywide and other lenders have promised officials around the country that they would consider re-working loans for borrowers who became trapped in loans they couldn’t afford, lenders haven’t always followed through on those promises. In this new settlement, the loan workout program is mandatory and will be monitored by state officials.
Countrywide, the nation’s largest lender and loan servicer, was bought by Bank of America earlier this year. A BOA spokesman told the Times the company had anticipated the cost of such a program before buying the troubled lender.
Countrywide settled without admitting any wrongdoing, the Times reported.
It seems fitting that one of the companies that helped create the subprime lending/foreclosure mess has to help clean it up. What do you think of this deal? Is it appropriate? Do you think Countrywide should have acknowledged “wrongdoing” in settling this case?
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I think it is fitting. It's a rare thing that a company that is forced not just to stop doing wrong because they went bankrupt, but to actually do the hard work of cleaning up the mess, as most individuals must when they make messes. Score one for accountability. Maybe it should be Accountability 1-Irresponsibility-4,362. The good guys are behind, but hey you have to start somewhere.
So it's good. But what I really care about is whether restructing the loans will stem foreclosures and help put a bottom under prices. Moral victories are nice, but they don't compare with EFFECTIVE SOLUTIONS.
Gah! They can't win, can they?
If they have strict lending standards, they're "redlining" people. If they have loose lending standards, they're "predatory." Either way, the government comes in and tells them to do the opposite.
I don't know the details in this particular case, but the fact that it comes from the NYT makes me wonder who's fault this really is. Frankly, I'm more apt to assume incompetence on Countrywide's part than malice, in spite of the "greed cause all ills" meme that's currently doing the rounds.
The settlement is a constructive effort to mitigate a number of loans where errors might have been made by Countrywide's personnel. I think we'll see more of this kind of lawsuit settled out-of-court by other lenders in the near future. It is one more step in trying to put a floor under the housing market.
Stacey,
When you describe the appropriate parties starting to pay I agree that Countrywide is one party; Also, The entire paid for and bought government (Democrats and Republicans. But especially the likes of Barney Frank and Chris Dodd. I hope Hell has a special place for such crooks) and the crooked homedebtor who lied on their application or was too caught up in making the big score to actually read what they were signing.
Yes once we have Angello Mozillo, Chris Dodd and Barney Frank in Jail and make those who falsified documents liable, I will sleep easily.
Until then there is Ambien.....
Do you acknowledge wrongdoing for censoring your posts?
It is a blog for a reason...to discuss ideas. You need to be brave enough to let posts which disagree on in order to make the chat educational.
The insulting stuff of course goes bye bye.
Why admit wrongdoing when whackadoodles are eager to blame everything on Fannie, Freddie, and the Community Reinvestment Act? True, you have to have a serious head injury to believe the CRA is to blame rather than Angelo Mozillo, but that describes about a third of the electorate these days.
I'm dubious many foreclosures will be stopped by this plan.
And amused by "moving assistance". Sounds like a cute way of bribing the non-payers out faster to save on foreclosure costs, whilst still getting credit from the media for doing something.
Which would you rather pay - $1,000 for "moving assistance" or $2,000 to the lawyer for foreclosure work? Let alone time, when you are certainly eating multiples of 1k a month on the unpaid note.
Of course, I've no sympathy for Mozillo or Countrywide, both of which were on the thin edge of ethics. But on the other hand, I don't have much sympathy for the people who borrowed money on houses they could never afford either. Unless someone pressured them into it.
But I'm pretty sure the pressure was "we better buy this now, even though we can't afford it, because we can make a fortune by selling it in 6 months before we have to pay for it!". Ie the pressure to gamble. (NOT "Invest"
Charles - have to disagree with you on one point. As home prices climbed exponentially, I think a lot of people were afraid that if they waited much longer they would never be able to afford a home. That, I believe, is the pressure most people felt. I agree -- that's no reason to buy something you couldn't afford in the first place, but I really don't think the real estate crisis is based primarily on people who thought they'd flip their house for profit in 6 months.
Steve, I think you're right, but in effect what you describe is gambling, even if its gambling on being able to live in the house when the bills come due, (because house prices always increase!) instead of gambling on being able to sell the house.
This blogger might want to review your comment before posting it.
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