Maybe a Silver Lining To That Subprime ARM From Countrywide After All

     Just when you thought all efforts to save the strapped homeowner with an adjustable rate mortgage or pay option ARM from Countrywide were exhausted, a settlement with their new suitor, Bank of America, has arrived. For the record, I am not a fan of Countrywide and what they participated in over the last few years to create growth for their stock price and shareholders, nor am I a fan of Bank of America for acquiring the hamstrung lender.

     However, because of the acquisition, potentially 400,000 homeownershave a shot to get out of the very loan type that the entire financial system is blaming for the market melt-downs. This settlement is valued at $8.4 billion of mortgage relief.  The program will systematically modify troubled mortgages with up to $8.4 billion in interest rate and principal reductions for nearly 400,000 Countrywide Financial Corporation customers nationwide.

1. Beginning December 1, 2008, Countrywide will proactively contact subprime and Pay Option ARM borrowers whose loans are scheduled for an interest rate change. They will invite them to contact Countrywide if they believe they will not be able to afford the new payments.
2. Countrywide will not advance foreclosures for eligible borrowers for the time necessary to determine the borrowers’ interest in staying in the home and their ability to afford the new terms as well as the investor’s willingness to accept a loan modification.
3. Countrywide will waive late/delinquency fees for missed payments when modifying loans and will not charge modification fees to borrowers in the participating states. When possible, Countrywide will waive prepayment penalties in connection with any workout or refinance, whether or not the new loan is originated with Countrywide.

Eligibility

Borrowers eligible for loan modifications under this program must have received a qualifying subprime mortgage or a Pay Option adjustable rate mortgage prior to December 31, 2007, in addition to meeting certain other requirements set out in the program:

• The borrower is 60 days or more delinquent and the current loan-to-value ratio is 75% or higher;
• The borrower is current today but becomes 60 days or more delinquent at any time prior to June 30, 2012, and the loan-to-value ratio at the time of the modification is 75% or higher;
• If the borrower has a subprime hybrid ARM and the borrower is current but reasonably likely to become 60 days or more delinquent as a consequence of a rate reset, and the loan-to-value ratio at the time of the modification is 75% or higher;
• If the borrower has a Pay Option ARM and the borrower is current but reasonably likely to become 60 days or more delinquent as a consequence of a rate reset or payment recast based on negative amortization, and the loan-to-value ratio at the time of the modification is 75% or higher; and,
• The property is a 1-4 unit owner-occupied residential property.

In addition, customers may be eligible for the early payment default benefit of this program if: (1) the customer has a Countrywide-originated first lien loan; (2) the loan was made between January 1, 2004 and December 31, 2007; (3) the customer’s primary residence is the property that secures the loan; (4) the customer has made three or fewer payments over the life of the loan (the borrower’s state may expand eligibility); and (5) the customer has either lost his home to foreclosure or is at least 120 days in arrears on mortgage payments.

THE FIRST OPTION IS HOPE

Countrywide and Bank of America and for that matter, America in general does not want 400,000 people to lose their homes.  If at all possible, loans will be reworked to fit under the FHA HOPE for Homeowners Program. If necessary, ARM rates may be reduced to as low as 2.5% and balances may be “written down” to 95% of the current value of the property. Loan modification programs will provide payments within the limits of an Affordability Equation set out in the agreement and be targeted to equate to 34% of the borrower’s household income.

Get Prepared

Whether you have questions about your mortgage or home equity, Call Countrywide at (800) 669-6650. Please be prepared to discuss household income and expenses. You should collect together and be prepared to fax or mail one or more of the following and have ready when you call:

• Have your Loan Number and Property Address at hand
• A brief explanation of your circumstances
• Recent income documents (such as Pay stubs; Benefit statements from Social Security, Disability, Unemployment, Retirement, or Public Assistance. If you are Self-employed, have your tax returns or a Year-to-Date Profit and Loss statement available for reference)
• Bank Statements and Tax Returns for Past 2 Years

     Some homeowners will get a window of opportunity to save their homes and put the taste of the past couple of years behind you and us as a result.  Some good things can come out of such bad events.