The state of New Jersey will receive $3.67 million from mortgage lender Countrywide Financial as part of Countrywide's settlement of a state lawsuit accusing the lender of misleading sales practices that led to large numbers of foreclosed homes in the state.
According to New Jersey Governor Jon Corzine, 50 percent of the settlement will be spent for programs aimed at reducing the number of foreclosed homes, and the other 50 percent would be used to help certain groups of former owners of foreclosed homes. The money is expected to help more than 8,000 homeowners.
In addition to the financial settlement, Countrywide Financial, now owned and run by Bank of America, has also agreed to restructure loans, counsel borrowers at risk of foreclosure and provide at least $2,000 each to aid homeowners moving out of foreclosed homes.
While settling the case, Countrywide, however, did not admit its marketing practices were misleading and that it caused the high level of state foreclosures. The state of New Jersey claimed that Countrywide's aggressive sales techniques for high-risk mortgage loans enticed lower-income families to borrow even if they could not afford the loans. The state claimed that the lender offered low initial rates and low initial monthly payments to borrowers who did not fully understand that the monthly payments would balloon in just a few months.
New Jersey Citizen Action's director Phyllis Salowe-Kaye accused Countrywide of being the state's largest predatory lender, even refinancing loans without first checking if the refinancing option helps borrowers or hastens the properties' conversion into foreclosed homes.
Under the settlement, Countrywide will reduce the principal amount of loans for homeowners whose loans are over 95 percent than the value of their homes. The lender is required to reduce total monthly payments, including property tax, interest and insurance, to below 42 percent of borrowers' monthly income.
Countrywide borrowers who are eligible for modifications and payment reductions are those who took subprime mortgage loans between January 1, 2004 and December 31, 2007; who have been in defaults for several months; who are about to make their first missed payments; and those whose loan amounts are more than three-fourths of the value of their homes.
Lastly, the state will also use some of the money to fund programs launched by the state legislature in 2008, including initiatives aimed at reducing numbers of foreclosed homes and programs that offer free counseling services and that mandate compulsory loan modifications.
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Joseph Smith has been educating buyers on the finer points of New Jersey Foreclosure Homes purchase at ForeclosureSupport.com for over five years. Click here to visit and read more advice on finding Newark Foreclosure Homes.
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