Attorney General launches restitution program for Countrywide customers

AUSTIN, TX - Texas Attorney General Greg Abbott today launched a restitution program that will make $7.46 million available to eligible Countrywide Financial Corp residential mortgage customers. Though the State's 2008 agreement with Countrywide will provide $345 million in total benefits to Texas homeowners, the restitution announced today is specifically set aside for Countrywide customers who lost their homes to foreclosure. Last year, the attorney general initiated an investigation into allegations that Countrywide encouraged homeowners to accept loans they could not afford, failed to fully disclose risky loan terms to borrowers, and wrote loans for unqualified borrowers in an effort to increase market share.

"The restitution program announced today provides financial assistance to Countrywide customers who lost their homes," Attorney General Greg Abbott said. "Last year we investigated Countrywide and reached a sweeping agreement that included loan modification opportunities for nearly 30,000 Texas homeowners. With today's announcement, we are implementing the final portion of our agreement and making restitution funds available to Texans whose homes were lost to foreclosure."

The state's settlement with Countrywide included the following:

  • $7.46 million in restitution for Countrywide's Texas customers who lost their homes to foreclosure--or whose payments were 120 days behind as of October 6, 2008;
  • $335 million in loan modifications for about 30,000 Texans; and
  • About 1,400 Texans who are in default - or are likely to be in default - on their subprime mortgages and who "voluntarily and appropriately" turn over their residence in the "Relocation Assistance Program," are eligible to receive up to $2,000. The Relocation Assistance Program is expected to provide $2.8 million in benefits to Texas homeowners.

Under the agreement's home loan modification program, eligible home owners can modify the terms of their residential loans so that monthly mortgage payments are more affordable. Modified loan terms will vary according to each home owner's circumstances. The potential modifications include interest rate freezes, interest rate reductions, loan term extensions, conversions from variable to fixed rate loans, and principal reductions. Eligible borrowers who participate in the program will not be charged late fees, loan modification fees, foreclosure fees, or pre-payment penalties.

Bank of America, which acquired Countrywide last year, will distribute to eligible homeowners program application forms. Texans who believe they may be eligible for the loan modification program should visit or call (800) 669-6650.

Today's announcement reflects the Attorney General's continuing focus on the mortgage-related issues. In September 2007, Attorney General Abbott convened the Texas Residential Mortgage Fraud Task Force, a legislatively-created initiative to improve cooperation and communication among law enforcement and regulatory agencies.

The OAG has also taken legal action against a variety of mortgage-related practices, including title-related scams, fraudulent refinancing ploys, and other mortgage-related fraud. In 2007, Attorney General Abbott secured $21 million in restitution for Texas homeowners who were harmed by lending giant Ameriquest Mortgage Co. The case resolved allegations that the company and its affiliates did not clearly disclose certain terms to homeowners, including unpredictable adjustable rates.

In 2006, Attorney General Abbott negotiated a landmark agreement with Green Tree Servicing L.L.C., a Minnesota-based firm that services manufactured housing debts in Texas. Under the settlement, Green Tree agreed to assist more than 1,200 Texas homeowners who may have been issued invalid titles to homes they purchased from unlicensed retailers in 2003. In a related move, the Attorney General secured an injunction and asset freeze against the unlicensed sellers. The OAG has also halted scams purporting to save homeowners properties from condemnation and cracked down on various title-related and refinancing scams.