Bank of America to Modify Countrywide Mortgages in $8.6B Deal

Bank of America will agree to modify loan terms, where possible, for up to 390,000 borrowers who took out subprime loans serviced by Countrywide in a deal that could be worth more than $8.6 billion, the Wall Street Journal (sub. req.) reports.

The deal, expected to be announced today, would settle claims by state attorneys general, the story says. Bank of America acquired Countrywide last summer.

Illinois Attorney General Lisa Madigan called the settlement “the first-of-its-kind mandatory loan modification program." She negotiated the settlement with California officials, the Associated Press reports. Nine other states have also joined the settlement and more may still sign on.

California Attorney General Jerry Brown said the deal is likely to become the largest predatory loan settlement in history.

Bank of America will modify loan terms for homeowners who are seriously delinquent in their mortgages or likely to become unable to make their payments. The program would reduce principal owed for some loans and reduce interest rates for others. The program would cut mortgage payments to no more than 34 percent of borrowers’ income.