January 28, 2009

Attorney General Corbett announces settlement with Countrywide Financial Corporation worth more than $150 million

HARRISBURG - Attorney General Tom Corbett today announced that the Attorney General's Office has reached a more than $150 million settlement with Countrywide Financial Corporation to obtain mortgage relief and cash assistance for thousands of Pennsylvania residents with loans through Countrywide.

Corbett said his office has been investigating Countrywide for several months and the investigation has centered on the subprime mortgages that were sold through Countrywide.

"Thanks to this agreement, Pennsylvania homeowners will now receive direct relief that will make a real difference, helping consumers caught in the subprime lending crisis," Corbett said. "We allege that Countrywide's practices misled many Pennsylvanians and encouraged them to take out loans they did not understand and ultimately could not afford."

More than 10,000 Pennsylvania homeowners may be eligible for loan modification, relocation assistance and mortgage foreclosure relief as part of the negotiated settlement.

The investigation found that Countrywide allegedly violated Pennsylvania's Consumer Protection Law by:

• Misrepresenting the quality and benefits of its products and services to consumers;
• Misrepresenting in its advertising that mortgage and loan packages were created by "personal loan consultants," tailored to the needs of individual consumers;
• Failing to exercise due diligence when recommending mortgage loan products to consumers and failing to meet heightened expectations caused by their advertising;
• Increasing 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;
• Making deceptive and misleading representations or omissions regarding the terms and charges of the loans, including, the interest rate, the adjustable nature of the interest rate and the credit status of the consumer;
• Engaging in "bait and switch" tactics by offering one interest rate, but actually giving a higher one;
• Failing to clearly disclose the financing terms to consumers.

Corbett said that 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 some of the riskiest and highest defaulting loans at the center of America's foreclosure crisis.  Assuming every eligible borrower participates, this loan modification program will provide more than $150 million in savings to Pennsylvania borrowers.

Countrywide has agreed to provide various forms of relief to consumers, including:

• Affordable, streamlined loan modification offers to more than 10,200 subprime and pay option adjustable rate mortgage borrowers;
• More than $2.7 million in foreclosure relief benefits for Pennsylvania consumers;
• Waivers of default/delinquency fees, loan modification fees and prepayment penalties.

According to the agreement, Countrywide has made a commitment to put a freeze on their foreclosure processes until each eligible consumer has had their financial status verified.

Corbett noted that consumers can call Countrywide's hotline at 1-800-669-6607 for more information about their eligibility.

Corbett encouraged consumers with concerns or complaints to contact the Attorney General's Consumer Protection Hotline, at 1-800-441-2555, or file an online consumer complaint at www.attorneygeneral.gov (Highlight the "Complaints" tab on the main menu and select "Consumer Complaints" from the list that appears).

The agreement, known as an Assurance of Voluntary Compliance (AVC), includes Countrywide Financial Corporation, along with Countrywide Home Loans Inc. and Full Spectrum Lending Inc. 

The AVC was filed in Commonwealth Court by Senior Deputy Attorney General John Abel and Deputy Attorney General Michael C. Gerdes of the Attorney General's Bureau of Consumer Protection

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