However, as of this morning, California Attorney General Jerry Brown may have reversed that fiscal flow and started taking it away.
At the end of June, he sued Countrywide for their predatory lending practices. Countrywide, you may remember, is the nation’s largest mortgage lender (or was before they were bought by B of A) and one of the main purps in the subprime debacle.
Early this morning, the AG’s office announced that they had obtained a big, fat $8.68 billion settlement—all of which is slated to be used as foreclosure relief, with $3.5 billion of that money going specifically to help California borrowers—perhaps as many as 125,000 of them.
“Unlike last week’s congressional bailout,” said Brown in his statement about the settlement, “this loan-modification program provides real relief for borrowers at risk of losing their homes. Tragically, California and the other states have had to step in because federal authorities shamelessly failed to even minimally regulate mortgage lending.”
Shamelessly is exactly the word.
Here are some of the hoped for benefits of the settlement:
In a nutshell, this settlement will enable eligible subprime and pay-option mortgage borrowers to avoid foreclosure by obtaining a modified and affordable loan. The loans covered by the settlement are among the riskiest and highest defaulting loans at the center of America’s foreclosure crisis. Assuming every eligible borrower and investor participates, this loan modification program will provide up to $3.5 billion to California borrowers as follows:
Ã¢â‚¬Â¢ Suspension of foreclosures for eligible borrowers with subprime and pay-option adjustable rate loans pending determination of borrower ability to afford loan modifications;
Ã¢â‚¬Â¢ Loan modifications valued at up to $3.4 billion worth of reduced interest payments and, for certain borrowers, reduction of their principal balances;
Ã¢â‚¬Â¢ Waiver of late fees of up to $33.6 million;
Ã¢â‚¬Â¢ Waiver of prepayment penalties of up to $25.6 million for borrowers who receive modifications, pay off, or refinance their loans;
Ã¢â‚¬Â¢ $27.9 million in payments to borrowers who are 120 or more days delinquent or whose homes have already been foreclosed; and
Ã¢â‚¬Â¢ Approximately $25.2 million in additional payments to borrowers who, in the future, cannot afford monthly payments under the loan modification program and lose their homes to foreclosure.
More specifically, the modification program covers subprime and pay-option adjustable-rate mortgage loans in which the borrower’s first payment was due between January 1, 2004 and December 31, 2007. The program will be available for loans in default that are secured by owner-occupied property and serviced by Countrywide Financial or one of its affiliates. In addition, the borrower’s loan balance must be 75% or more of the current value of the home, and the borrower must be able to afford adjusted monthly payments under the terms of the modification.
Ten other states participated in the settlement, but AG Brown led the negotiations.
“Countrywide’s lending practices turned the American dream into a nightmare for tens of thousands of families,” harrumphed Jerry, “by putting them into loans they couldn’t understand and ultimately couldn’t afford.”
But in this case, instead of the tax-payers taking the hit, the bailout bucks are for homeowners, and are being helpfully—if not altogether willingly—provided by those who made big money off of selling, then reselling, those infamous toxic mortgages.
(And, yes, this very cheery announcement gives Jerry the kind of bragging rights that he will assuredly use when the 2010 race for the California governorship begins to heat up.)
The LA Times has more.