Under the $8.7-billion loan workout program that Bank of America will announce today for Countrywide borrowers, interest rates will be slashed as low as 3.5% for some borrowers, and foreclosures will be frozen for thousands of borrowers who might qualify.
An estimated 125,000 Californians who are struggling with risky mortgages from Countrywide Financial Corp. may get their loans modified and payments reduced under a program to be announced today.
Bank of America said Countrywide mortgage-servicing employees would be trained to carry out the program by Dec. 1 and would then begin reaching out to eligible customers. The plan includes a foreclosure freeze for borrowers who are likely to qualify until Countrywide has determined their eligibility, the bank said.
The program will first identify customers who have fallen behind on their mortgages by more than 60 days or are likely to do so because of loan features such as rate or payment increases, said Benjamin Diehl, a California Department of Justice attorney. These customers will be contacted by Countrywide starting Dec. 1.
Various options will be considered for eligible customers, with employees handling the workouts instructed to first consider refinancing into a fixed-rate Federal Housing Administration loan, Diehl said.
The options on subprime mortgages also include keeping the initial rate for five or 10 years, having the borrowers pay interest only and reducing the interest rate to as low as 3.5%, Diehl said.
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