Bank of America Corp. says it offered to modify more than 100,000 home loans in a four-month period, more than double the number required under its settlement of accusations of predatory lending that California and other states brought against Countrywide Financial Corp.
The giant bank acquired Calabasas-based Countrywide as the then-leading U.S. home lender’s financial situation deteriorated last year.
To settle the state cases, the bank agreed in October to modify certain Countrywide high-risk loans with the goal of reducing payments on primary mortgages to 34% of borrowers’ income, potentially saving them billions of dollars over the life of the loans.
The 100,300 modification offers during the four months that ended March 31 were twice as many as the 50,000 required during the period under the agreement between the bank and state officials including California Atty. Gen. Jerry Brown.
Modifications were completed on 50,147 loans during the four months, according to a recent report to the state by the bank.
The states accused Countrywide of improperly steering borrowers into subprime and other risky loans.
During the housing boom, such mortgages were profitable fodder for complex bonds that found eager buyers around the world -- until defaults mounted, triggering the meltdown in the financial markets that took hold in 2007.
Bank of America spokesman Rick Simon said the Charlotte, N.C., company was pleased with the early results of the modification effort.
“The program is off to a faster start than required,” he said.
Fair-lending advocates said they would ask Brown and the bank for more information on the program and whether the bank staff working with borrowers was adequate to deal with a new wave of delinquencies generated by the bad economy slamming borrowers with prime loans.
The Bank of America program addresses only subprime loans made to the riskiest customers and pay-option loans, the mortgages that allowed people to pay so little that the amount they owed went up.
“We’re interested in knowing what kind of modifications these are,” said Orson Aguilar, executive director of the nonprofit Greenlining Institute, noting that many previous modifications by mortgage lenders merely added missed payments to the loan balance, sometimes causing the monthly payment to rise.
“The key question is Countrywide’s capacity and resources. We’re hearing people say that only if you’re in really deep trouble will you get help,” Aguilar said.
“There are accusations that you have to miss several [loan] payments first, which creates a terrible incentive for people to default.”
Bank of America spokesman Dan Frahm said the bank had 7,000 employees who had helped 387,000 borrowers hang onto their homes over the last 16 months.