According to Brown's office, the settlement could save borrowers up to $8.7 billion nationwide, nearly all of it through interest rate and principal reductions. There was no word on how much people whose homes had already been foreclosed would receive.
The $8.7-billion estimate assumes that all eligible borrowers participate and that investors in mortgage securities cooperate with the loan workouts.
Those are big ifs, said Robert Gnaizda, general counsel of San Francisco's Greenlining Institute, a fair-lending advocate. "There's no way of saying how much borrowers are going to save on this. The talk of $8 billion is pure speculation," Gnaizda said after reviewing a description of the plan. "All that being said, I believe this is a very important first step."
The agreement almost certainly would rank as the largest predatory-lending settlement in history, dwarfing the nationwide $484-million settlement with Household Finance Corp. in 2002 and a $325-million settlement with Ameriquest Mortgage Co. in 2006.
Those settlements involved payments to borrowers, however, not loan modifications.
Bank of America officials said the settlement costs would not exceed those anticipated when it acquired Countrywide in July for $2.5 billion in stock.
Although numerous lawsuits and federal investigations continue against Countrywide, ex-Chairman Angelo Mozilo and other former executives, the settlement helps Bank of America shed liability for the aggressive lending that helped trigger the current global financial crisis and left hundreds of thousands of Americans stuck in loans larger than the value of their homes.
Under BofA ownership, Countrywide has stopped making the types of adjustable-rate loans that caused the most problems, officials said.
Countrywide's prior lending practices put families into loans they couldn't understand and ultimately couldn't afford, according to Brown, who said the settlement sought to compensate the borrowers.
According to the agreement, borrowers assisted by the loan workouts would not be precluded from joining private class-action lawsuits against Countrywide or pursuing their own claims.
Barbara Desoer, president of Bank of America's mortgage and insurance operations, said: "We are confident that together with the attorneys general we have developed a comprehensive program that provides more solutions than ever before to assist troubled borrowers and put them back on the path to sustained home ownership."
