PA AG, Countrywide Reach Settlement

The Pennsylvania Office of Attorney General said it has reached a $150 million settlement with Countrywide Financial Corp. to obtain mortgage relief and cash assistance for thousands of Pennsylvania residents with subprime loans sold through Countrywide. More than 10,000 homeowners may be eligible for loan modification, relocation assistance and mortgage foreclosure relief as part of the negotiated settlement, according to the AG's office. Attorney General Tom Corbett's investigation found that Countrywide violated the state's consumer protection law by misrepresenting in its advertising that mortgage and loan packages were created by "personal loan consultants" and tailored to the needs of individual consumers. The AG alleged that the lender failed to exercise due diligence and increased its sales and profits by relaxing its underwriting standards, which allowed consumers to obtain loans that were risky and ill-suited for their income levels. He said Countrywide engaged in "bait and switch" tactics by offering one interest rate, but actually giving a higher one. Mr. Corbett said that this settlement will allow eligible subprime and pay-option mortgage borrowers to avoid foreclosure by obtaining modified and more affordable loans. Countrywide has agreed to provide more than $2.7 million in foreclosure relief benefits. According to the agreement, Countrywide - which is now part of Bank of America - has made a commitment to put a freeze on the foreclosure process until each eligible consumer has had his or her financial status verified.