SPRINGFIELD, Ill. – Facing a lawsuit over deceptive mortgage practices, Bank of America Corp. has agreed to modify tens of thousands of loans to keep people in 11 states from losing their homes, the Illinois attorney general’s office said Sunday.
Borrowers stuck with mortgages they can’t afford could see their interest rates reduced or have the loan principal cut. Some might qualify for interest-only payments for a decade. Even people who can’t afford to keep their homes with such changes will be able to get help moving to a new home.
“This is going to provide a tremendous amount of relief,” said Illinois Attorney General Lisa Madigan.
Her office and officials from California negotiated the settlement. Nine other states have also joined the settlement, and other states could sign on, said Deborah Hagan, chief of Madigan’s Consumer Protection Division.
In California alone, the settlement will offer $3.5 billion in relief. The total for the 11 states was not immediately available.
The settlement applies to people who obtained their mortgages through Countrywide Financial Corp., which Charlotte, N.C.-based Bank of America purchased in June, at the same time Illinois and California sued the company.
“Countrywide’s lending practices turned the American dream into a nightmare for tens of thousands of families by putting them into loans they couldn’t understand and ultimately couldn’t afford,” California Attorney General Jerry Brown Jr. said in a statement Sunday.
The other states joining the settlement are Arizona, Connecticut, Florida, Iowa, Michigan, North Carolina, Ohio, Texas and Washington.
Bank of America will launch the new mortgage aid program in December, said Barbara Desoer, president of Bank of America’s mortgage, home equity and insurance services.
The mortgage aid includes revising customers’ payments so they don’t exceed 34 percent of income, reducing interest rates and adjusting principal so that borrowers don’t wind up actually losing equity under some payment plans.