Countrywide tries changing bad to good
Countrywide Financial Corp. is promising to reach out to 82,000 of its borrowers and refinance or modify around $16 billion in home loans. Consumer advocates say it's about time. Bob Moon reports.
Marcus West, left, and Larry Heard participate in a protest at a Countrywide home loans center in Orlando, Fla., on Oct. 9. The protest was organized by the group ACORN to bring attention to what it claimed were Countrywide's predatory lending practices. (Joe Raedle/Getty Images)
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KAI RYSSDAL: Any resemblance to the Godfather is purely coincidental, I'm sure, but Countrywide made some of its customers an offer today that they can't really refuse. Not if they want to keep their homes, anyway. The nation's biggest mortgage lender said it's going to reach out to about 82,000 of its borrowers and refinance or otherwise modify about $16 billion worth of home loans. That's a pretty small slice of the loans Countrywide has outstanding. But it is just the kind of thing the Bush administration has been pushing for. And consumer advocates something is better than nothing. Here's our Senior Business Correspondent Bob Moon.
BOB MOON: Millions of Americans with adjustable-rate home loans face rising payments between now and the end of next year. The mortgage industry is under mounting pressure to do something to head off a looming foreclosure crisis. Just last week, Treasury Secretary Henry Paulson warned of what he called an "immediate need" for more loan restructurings.
Today, Countrywide promised to assist borrowers "who have a willingness and wherewithal to remain in their homes." The reprieve would not apply to those who fall behind because they've lost their jobs or if they lack the income to keep up with a roll back to more favorable mortgage terms.
Consumer advocates hailed the move as an important step. John Taylor, who heads the National Community Reinvestment Coalition, hopes it'll spur other lenders to offer similar relief:
JOHN TAYLOR: I do actually think that there are a lot of players in the financial services sector, banks in particular, that are recognizing we can't allow 2 million foreclosures to drag this economy and the financial services sector down.
But working out better terms with lenders might be easier said than done in many other cases. Nicholas Retsinas heads Harvard University's Center for Housing Studies. He points out many mortgages have been bundled, sold and then passed along in packages to other buyers:
NICHOLAS RETSINAS: In some cases, the lenders were just originating the mortgages. The mortgages are actually held by investors -- investors as far reaching as the central bank of China, hedge funds, a whole variety of investors, not even sure they hold some of these mortgages.
House Democrats have just proposed a measure aimed at dealing with that problem. It would let borrowers sue the big Wall Street banks that buy and resell those mortgages, if the homeowners can show there was no effort made to verify their ability to realistically pay back their loan.
In Los Angeles, I'm Bob Moon for Marketplace.
