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Some Checks from Agreement With Countrywide ‘in the Mail’

Some state attorneys general participating in a national 2008 agreement with Countrywide Financial Corp. have promised affected borrowers that their checks are in the mail.

The AGs said the payments are related to their charges that some borrowers lost their homes to foreclosure due to the company’s lending practices.

The checks are the fruition of the early default relief payment component of an agreement with Bank of America, which now owns Countrywide, developed in conjunction with several state AGs and announced in October 2008 to provide relief to Countrywide subprime and option ARM borrowers, according to Rick Simon, media relations, Bank of America Home Loans in Calabasas, Calif.

Simon said the agreement also includes the National Homeownership Retention Program (modifications) and a relocation assistance program for homeowners and tenants who have suffered foreclosure since this agreement was signed.

The payments going out this month “are all related to the agreement announced in 2008,” said Simon.

“In several states, this agreement has provided settlement of lawsuits or AG regulatory complaints,” he said. There were 11 original states that signed on in October 2008. “There are now 43 states and the District of Columbia signed to the agreement,” said Simon. Under the early default relief component of the agreement, $150 million has been allocated nationally to be paid to eligible Countrywide customers who went into default soon after the origination of a subprime or option ARM loan (in 2007 or earlier) and ended up in foreclosure prior to the agreement taking effect. Each state has an allocation, which is divided equally among the eligible borrowers who have filed valid claims under the program.

In this first round of payments, nearly $114 million is being paid to some 37,000 former Countrywide customers in 41 participating states.

The payments are being distributed by a third party, Rust Consulting, under terms of the agreement. Eligible borrowers in the most recent signatory states will be asked to file claims for future payments, and allocations are set aside for borrowers in the seven unsigned states for distribution if AGs in those states decide to participate in the agreement at a future date.

In Connecticut, for example, attorney general Richard Blumenthal said Countrywide has mailed each eligible Connecticut resident a check for $3,450 under the nationwide agreement he helped negotiate. The payments are part of a nationwide $113 million settlement, according to the AG.

“My office fought for and won compensation — more than $3,400 per homeowner — to consumers duped by Countrywide’s former management,” Blumenthal said. “This money helps consumers who lost their homes begin rebuilding finances mauled by Countrywide’s cruel mortgage cons.”

The AG says Countrywide’s previous management enticed homebuyers into mortgages they could not afford, forcing foreclosure and bankruptcy.

“The company’s traps and tricks included bait-and-switch payment terms, encouraging consumers to take out loans they obviously could not afford and excessive and unjustified fees. Countrywide’s new owners did the right thing, heeding our demand that they compensate consumers who were burnt and bamboozled,” the Connecticut AG said.

Blumenthal alleged that Countrywide’s abuses included improperly inflating consumers’ incomes to qualify them for loans they otherwise could not have received and pressuring consumers into mortgages with temporary interest-only payment options when the company knew or should have known they could not afford the higher payments that would come due later.