Illinois Attorney General's Landmark Settlement in Predatory Lending Suit

                                  On October 6, law suits originally brought against Countrywide Financial ( acquired by Bank of America) by Attorneys General Lisa Madigan of Illinois and Jerry brown of California, later joined by  several other states and the City of San Diego, resulted in a settlement that provides the first mandatory loan modification program for the home owners who were victims of massive predatory lending that created the toxic loans that were spread throughout the economy and helped precipitated the nationwide financial services crisis.

In a press release from her office Ms. Madigan said, “This settlement holds the number-one mortgage lender in the country accountable for deceptively putting borrowers into loans they didn’t understand, couldn’t afford and couldn’t get out of. These are the very practices that have created the economic crisis we’re currently experiencing,” Madigan said. “I am pleased that Bank of America has worked with us to reach this important settlement. It is incumbent upon all lenders and servicers to continue to look for ways to help homeowners in trouble. At the same time, we must demand that Congress put tighter rules and regulations into place to prevent future crises.”

The attorneys general that brought the suits that lead to the settlement, actually had differing reasons  for their filings, as the article, "Tough Talk on Countrywide Mortgage Suits", by Cheryl Miller in The Recorder, indicates. They did agree that they did not want their cases transferred out of their home districts. Bank of America had requested the U.S. Judicial Panel on Multidistrict Litigation to consolidate six of those cases in one U.S. court in Los Angeles. The Panel would probably have agreed but the negotiation track succeeded before the cases went  to trial.

The settlement promises to provide real and timely relief to beleaguered mortgage holders and the restructured loans should prevent further defaults and additional toxic loans from entering the market. The press release from Lisa madigan's office, summarizes the provision of the settlement :

• Suspend foreclosures on the riskiest loans to determine if borrowers qualify for modification.
• Establish a Foreclosure Relief Fund of $8.5 million for borrowers in subprime and pay option ARM loans who lost their homes due to early payment default or default at the time the interest rate reset. Early payment default is a strong indication that the loan was not underwritten properly and that the homeowner couldn’t afford the loan from the beginning.
• Help homeowners through a $1 million relocation assistance program, which will provide payments to homeowners who cannot qualify for a loan modification. The funds will help borrowers relocate if necessary.
• Waive loan modification fees and late fees.
• Waive prepayment penalties on subprime and pay option arm loans owned by Countrywide.

Pay $1.7 million for the costs incurred in Madigan’s investigation, eliminating taxpayer expense.

[ Madigan’s Consumer Fraud Bureau Division Chief Deborah Hagan handled the case with Assistant Attorneys General Susan Ellis, Veronica Spicer, Brenda Grauer, Tom James, Shantanu Singh, Michelle Garcia, Jennifer Franklin and Cecilia Abundis. ]

Howeowners who have questions about the settlement and how it may affect them can call Bank of America 1-800-669-6607 or Madigan’s Homeowners Referral Hotline at 1-866-544-7151 from 8 a.m. to 8 p.m. Monday to Friday.