The acquired lending institution settles its suspected excessive loan sales
After coming under fire, Countrywide Financial has found a way to settle its obligations. True to its claim that it has saved millions of Americans from dashed hopes of owning houses, it plans to provide $8.4 billion of direct loan relief to its affected borrowers. It will also forgive some additional fees to ease the mortgages of its customers. This comes after Bank of America acquired the lending firm that has been involved in a series of loan scandals and left thousands of its borrowers homeless.
In a report by Gretchen Morgenson in The New York Times, Countrywide is set to modify the loans and reset the higher mortgage rates that have crippled its borrowers’ finances. It is expected therefore that those who are behind in their monthly payments will have their interest rates reduced to as low as 2.5 percent. Not bad for somebody who is supposed to pay 2.5 times the new rate.
Under the new management by BoA, we believe that this will be the first in a series of loan restructurings in our financial markets. So, at a minimum, we must laud this move to assist those who face losing their home through foreclosure. Then again one couldn’t help but argue that these affected borrowers should have thought twice before signing the mortgage contracts and realizing their ability to make the principal payments in the coming years.
More so, the corporate heads, whom are still getting the blame from their former employees who were forced to push the limits in securing loans from customers. A lot has been reported about the top management’s conduct when it came to employee relations. And what resulted for several months was a mortgage mill instead of a lending firm.
Now that the bailout plan has been approved, the financial industry stands in the way of recovery. However, make no mistake about it. The $700 billion package isn’t a universal solution to the crisis. For it to work, our economic fundamentals have to be restored to its sterling levels and the private market must act in the best interest of its customers. It’s a move that BoA and Countrywide is supposed to achieve with its loan modification plan.