Critics Say Countrywide Isn't Doing Enough To Help Foreclosed Homeowners

Countrywide is catching hell from consumer advocates who say they’re not doing enough to help the homeowners they’ve foreclosed on.

While other lenders are refinancing troubled borrowers into fixed rate mortgages, critics say Countrywide is funneling customers into yet another risky ARM loan.

From CNNMoney:

ACORN Housing Director Michael Shea said that while his group is “often able to get workouts” from Countrywide, his team is “very frustrated” with the company because “it takes a long time – months” to deal with a case.

And, Shea said, the company relies heavily on “repayment plans” for its workouts. Such a plan may stave off foreclosure by letting delinquent borrowers pay off what’s past-due over 12 months in addition to their regular mortgage payment. While the servicer is making a concession by not demanding payment all at once, delinquent borrowers have to pay substantially more than their regular monthly payment. And if they fail to pay in full and on time, the lender can reinstate foreclosure proceedings.

One of the biggest complaints from NTIC counselors is that what loan workouts Countrywide does provide serve more as foreclosure postponement than real prevention. “They refuse to make ARMs fixed for the remainder of the loan. Instead, they are only agreeing to do so for 12-24 months, if at all,” said Mark Seifert, executive director of the Cleveland-based NTIC affiliate, The East Side Organizing Project (ESOP), in an e-mail.

Countrywide’s alleged preference for shorter-term loan modifications in Siefert’s experience “is very different from what we see from our lender/servicer partners where EVERY mod includes making the ARM a fixed rate going forward.”

NTIC and its affiliates have partnerships with four servicers: Chase, Citi, Ocwen and Select Portfolio Servicing (SPS). “They’re showing absolute diligent effort to help homeowners stay in their home, not band-aid solutions,” said Michele Rodriguez Taylor, who heads NTIC’s foreclosure-prevention program.

Countrywide responded to the criticism by saying that it “is doing as much as, if not more than, any servicer in the industry, striking the appropriate balance between the interests of borrowers and investors whenever they can.”

It also reminded CNNMoney that it “received the highest ranking for its workout programs from both Freddie Mac and the Department of Housing and Urban Development (HUD), which evaluates servicers based on their use of workouts to avoid foreclosures.” We find this hilarious because Freddie Mac deals exclusively with “prime” loans. Way to change the subject.

Countrywide’s ‘workouts’ fall short, critics say[CNNMoney]
(Photo:Jodi Hilton for The New York Times)

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  1. Maybe I’m insensitive or I don’t fully understand the situation or something but if you can’t make your payments why should they do anything to help you? If I didn’t make my auto loan payment or my home loan payment I’d fully expect to have my truck repossessed or my home foreclosed. Are we past the days when you don’t (try to)buy something you aren’t able to afford?

  2. protest says:

    @solareclipse2:

    the problem is that they could afford it when they got the loan, but not anymore. i agree with you about personal responsibility, i pay all my bills in full every month, so why shouldn’t they. but after reading so many articles about this thing, it sounds like a lot of people were convinced either that their mortgage was fixed when in fact it wasn’t, or that an ARM wasn’t bad. still falls on people to read the paperwork completely and research what kind of loan they were getting in the first place.

  3. remusrm says:

    actually you might be surprised… even if they knew what was happening later found out they were screwed… i knew a few peeps that would fake docs to get loans and approve them, etc. and then bamn… to country wide…

  4. joeblevins says:

    What is Countrywide doing wrong here?

    Party A enters into agreement with Party B to loan x amount of money with repayment agreement y, using item z as colleteral.

    Umm. Party B failed to meet the terms of the contract.

    Then Party A bends over backwards to help them meet the terms, yet they are considered the bad guys?

    Zero critizism of the borrower in the article.

    Again, personal responsiblity is absent in the discussion.

  5. gruffydd says:

    If these people were convinced that they were getting a fixed rate, but signed docs for an ARM, they should still be held accountable, unless total fraud was commited.

    We bought a house last year, and had to weed through many options (tactics) presented by our real estate agent and mortgage broker.

    1. Do a bridge loan! (Buy the next house before selling the first – so that when the 1st house doesn’t sell quickly, we do whatever we can to sell it, and the RE agent gets her commission)

    2. Get an ARM – “C’mon in 5 years you’ll be making more money, and besides you can refinance if you have to, and you’ll probably be ready for your next house by then, anyway!”

    Common sense people….buy what you can afford.

    A co-worker of mine is having problems making her mortgage payments now. I feel bad for her…don’t want to say to her, “I told you so”, but I remember a few years back, saying it wasn’t a good idea.

  6. vex says:

    Depends. If they signed up for an ARM, were told what it was, and just saw the nice low monthly payment, then I have no sympathy. I read my entire contract, knew the different mortgage types before I went in with a little research on ARMs, IOs, Conv., FHA, etc…everything appeared like a 30-year fixed. Says 30 year fixed. Could they bury in the legalese that the average person can’t understand that change the terms of the loan? Maybe! If that’s the case, they need someone to crack down on Countrywide. These people may really have gotten duped.

    Fact is, if you swap the ARM for a fixed, the rate is going to be higher. Switching an ARM to a fixed and keeping their low-low rate just so they can afford the payments will 1) not pay off the principle in the alloted time and 2) is unfair to those of us with higher interest conventional loans. If you can’t afford a regular 30 year fixed at the current rate, these people cannot afford the house they bought, and should get no special treatment.

  7. hypnotik_jello says:

    @gruffydd:you mean buy what you can afford after the ARM resets?

  8. TehRev says:

    “A co-worker of mine is having problems making her mortgage payments now. I feel bad for her…don’t want to say to her, “I told you so”, but I remember a few years back, saying it wasn’t a good idea.”

    How true is that. I know lots who are in that position. I remember when they were all geniuses a while back getting expensive houses with cheap payments. They really didn’t want to listen when I asked some hard questions. Sucks to lose your house, but lots around here aren’t poor they were just greedy.

  9. 3drage says:

    They should have read the fine print, buyer beware, and all that jazz. Home ownership comes with a ton of responsibility, one of which is making your payment on time. Don’t buy a house if you can’t afford it. That simple.

  10. Rusted says:

    @3drage: How true, how true. I’m not responsible for the stupidity of others.

    Reading the story, at least Countrywide is doing something to keep from foreclosing, even if it’s yet another ARM. It’s not out of altruism however.

    The lenders don’t want the houses since not a few would be upside down (value vs amount borrowed), and although they would try to recoup the difference from the borrower, it would be like trying to squeeze blood out of a stone.

    @gruffydd: It wasn’t just the ones with bad credit. When I was trying to stay in my old area, they were trying to upsell me too. Kinda glad I did the equity refugee bit and paid cash.

  11. You guys have all touched on a lot of points that people seem to miss nowadays. People don’t buy what they can afford, people don’t read fine print, people don’t educate themselves about what they’re getting into and something I always do is get a second opinion. If people don’t understand contracts, there are others who do so get one and have them explain it.

    If these people were outright lied to then yes, they should have concessions made for them. I’m all for that but they they rushed into a situation involving a lot of money not knowing/understanding what they’re getting into then they have a big problem.

    I can also see a need to accommodate people who’s situations have changed but things like that have to be used sparingly.

  12. tadowguy says:

    Why no protests of La Cosa Nostra? They also don’t help people who don’t pay their bills.

  13. CumaeanSibyl says:

    If you have a debt sent to collections, you can often work out a payment plan with them according to what you’re able to pay. Sometimes they’ll forgive part of the debt, too.

    They do this because it does them no good to be inflexible on terms when that drastically reduces the chances of them getting their money back. They realize that it’s better to get some money than none at all.

    Now, I’m not saying that mortgage lenders should forgive any part of the money owed, but they have an even greater incentive to work out a reasonable payment plan: if the owner defaults, then the lender is stuck with a house. Keeping track of the houses you own and the sales thereof requires extra time spent by your staff. Bank-owned properties sell pretty cheap, especially these days, so the bank may end up losing money on the deal.

    Basically, it’s in the lender’s best interests to contine accepting money from the homeowner, even if the interest rate isn’t as high as they want it to be. You can accept a lower profit from the loan, or you can try to sell it and get $80K for a house with $120K of mortgage/HELOC debt on it. It’s a pretty simple choice, to me.

  14. tadowguy says:

    Also, I might point out that while I owe Countrywide about $150k, Countrywide was not my loan originator, so you can’t blame them for supposed “fraud” in many of these cases. IMHO, this makes it doubly not their fault for these illiterate morons who don’t bother to read their loan contracts.

    I feel sympathy for people with medical emergencies or job loss, but for the rest of these losers, bring back debtors prison. I end up paying for your stupidity with higher rates and fees. Thanks.

  15. vex says:

    The interest rates have to be high, it’s not a matter of how high the bank “wants” them to be. If 10 people with bad credit buy a house and statistics show 2 of them will foreclose within 2 years, the rates on those other 8 borrowers will be higher to offset the loss of the other 2.

    It just isn’t as simple as lowering the rate to keep the payments coming in or that paying something is better than nothing.

  16. camille_javal says:

    Everything said about responsibility is true, but I think another major concern is the effect that *massive* numbers of foreclosures will have on all of us. Foreclosing, as I understand it, isn’t as good for the mortgage financiers in the long run as making sure they will continue to get money. All in all, the economy takes a downturn and it affects a lot more than just the people who “deserve” it.

  17. vladthepaler says:

    If people aren’t paying their mortgages, I don’t see how the mortgage holder has an obligation to help or offer them a deal. It’d be a nice, but I’d think of it as an “above and beyond” sort of thing, not something they should be criticized for if they don’t do.

  18. hypnotik_jello says:

    @camille_javal: Not just the mortgage companies, but remember that subprime debt has be sold as repackaged traceable securities, so it has a larger impact on the broader economy. I believe SmithBarney’s hedge fund collapsed because of bad subprime debt.

  19. Xerloq says:

    Perhaps giving these borrowers what they want will fix things. Like vex said, fixing the arm won’t pay off the loan in the allotted time. I’m sure the borrowers won’t be happy fixing the rate to a 90 year loan to pay what they owe, but then again, all most people care about are the monthly payments. That and getting stuff for free.

    BTW, here’s a pretty cool mortgage calculator that provides a great visual of what a mortgage costs.

  20. hypnotik_jello says:

    @hypnotik_jello: err, tradeable (not traceable) securities. oops

  21. hypnotik_jello says:

    @hypnotik_jello: Sorry, it was Bear Stearns, not SSB:

    [www.businessweek.com]

  22. gruffydd says:

    @hypnotik_jello:
    Buy what you can afford on a fixed rate

  23. howie_in_az says:

    I’ve decided that I don’t feel like paying my 5% fixed-for-30-year mortgage anymore. Countrywide should lower that rate so I can have more money to spend on useless plastic things.

    For whatever reason I continue to get hung up on when I approach Countrywide with this proposition.

  24. DeleteMyAccountPlease says:

    I’m so sick of this damn argument. People speculated/invested/gambled whatever you want to call it, that the price of homes would go up at insane rates forever. And to get these loans, they lied, committed fraud, and went against every traditional metric of what home they could afford. Now people are gonna lose their homes cause of it. But we wouldn’t want that, because then they’d be reject retarded ass renters again. Well guess what? 30% of this country rents. It ain’t all that bad! Get over yourself.

  25. SadSam says:

    I’m certainly not on CW side and also have sympathy for the few cases where fraud (switching papers, forging signature, etc.).

    But, I do have one big question/concern. A good number of these folks had the benefit of a low teaser rate of 0%, 1%, 2%, 3%, etc. for the last 2-3 years and that rate was eventually adjusted upward (north of the rate on a fixed 30 year mortgage) to make up for the fact that these folks were, basically, paying below market rates on their loans. Is it fair or right for these folks to be put into a conventional loan at a fixed rate (like the rest of us) while having the benefit of 2-3 years of paying below market rates. If you’ve been paying 0% on your loan for the last 3 years, shouldn’t the rate go up to 8 or 10%? The 5% fixed rate should be reserved for those of us who’ve been paying it the last 5 years.

  26. hypnotik_jello says:

    @Jeff180: Yes, the people who took these rediculous loans out should not be surprised that they are being foreclosed on, nor should they expect the company to give them a break. On the other hand, I don’t think these companies should get a break either for selling these bad loans. They should not be bailed out by the government. If they have a ton of bad debt and will go bankrupt let them. Just as the people who took out the loans are responsible for their own mess, so should the corporations. We shouldn’t have a double standard here. And what’s with cutting the interest rate to help the market during its credit crunch? Why should the government have to bail out the market?

  27. joeblevins says:

    Sadsam, how dare you!!! There are no consequences for those that try to scam the system, only for those that follow the rules.

  28. synergy says:

    I have no sympathy. They get to have a cheap loan and then when they can’t pay they get a pat on the hand and a change in their contract? Bullshit.

  29. skittlbrau says:

    @tadowguy: LOL. Suddenly my neighbor who likes to bet on sports has a broken hand… apparently they didn’t grant him a forebearance.

  30. protest says:

    @hypnotik_jello:

    totally agree with you. i thought that a company that makes bad business decisions goes out of business. isn’t that the natural order of things? now we’ve got the government bailing out these huge companies that just trip over themselves and i ask: “what is the point?” let them fail and let us consumers get some new blood.

    also, i’d like to know who’s job it is to decide what companies the goverment “bails out.” i know a lot of deserving, small, local businesses that are going under because walmart moved into town, you don’t see the government doing anything to help them.

  31. Keter says:

    Interesting how Countrywide called me the other day and offered to refinance my fixed-rate loan for lower payments or a shorter term…I didn’t ask, but I’ll be willing to bet an ARM was in there somewhere. Every mailer I’ve gotten from them said I was “eligible” to lower my payments by 15% or more — and in the fine print was refinancing to an ARM. ARMs are still their core business!

    This is also a clue that they are stepping up efforts to “freshen” their portfolio and draw some quick fees by refinancing their older low-risk loans (i.e., years of payments made on time and in full with no drama). The fact that these older loans also have significant equity value means that foreclosure would probably be desirable from their perspective so they could cash out fast.

  32. mortgagelawyer says:

    Countrywide and other lenders and servicers will do what is in their best interest. It is irrelevant whether or not mortgagors deserve a break (in the form of a mortgage modification). Good business will dictate each homeowners situation. Those who request a modification and can prove that the lender will minimize its losses by granting such request, will have their mortgages modified. Others will be turned down. Present your case both factually and artfully and you may save money (perhaps far more importantly, your house). Try it, nothing ventured nothing gained.

  33. alva says:

    when I closed on my house, the bank tried to convince me to get an adjustable loan and stated that I could get a lower fixed interest rate later when the market changed. I did not know much about it, but I told them no because I did not want a different morgage payment every month. Thank God I did it that way because the way things are right now, I could have lost my house. I have a friend that her payments went up 700 a month and she is in big trouble.

  34. lboyette71 says:

    If you are interested in building a Class Action Case against them please contact me with your story and leave your contact information. Only make contact if your willing to go through with the waiting process, but we as consumers need to step up and hold them accountable for using our lack of mortgage knowledge to take advantage of our naivety. lboyette71@gmail.com