by Catherine Reagor - Nov. 1, 2008 12:00 AM
The Arizona Republic
A large number of Phoenix-area homeowners facing foreclosure have received a reprieve.
Bank of America, which last summer bought the nation's largest subprime lender, Countrywide, has suspended foreclosure notices pending against nearly 2,000 homes across the Valley in the past week in an effort to help homeowners hold on to their property. And relief for even more homeowners is expected to follow.
The move, which will lead to cuts in people's mortgage payments, is part of the bank's recent settlement agreement with the office of Arizona Attorney General Terry Goddard and could help stem the growing number of foreclosures that has crippled the local housing market.
Last month, BofA agreed to modify loans for struggling borrowers if attorneys general from Arizona, Texas, Ohio, Iowa and Washington halted legal action against Countrywide. That action is based on the lender's "alleged use of deceptive practices" in its mortgage-lending business, according to Goddard.
The deal requires BofA to place a temporary hold on foreclosures on loans made up until the end of 2007 and work with buyers to make their mortgage payments more affordable so they have the option of staying in their homes.
Rick Simon, spokesman for BofA, said the bank will contact homeowners when its home-retention program is ready at the beginning of December.
About 13,000 mortgage holders in Arizona are eligible for loan modifications under the agreement, according to an estimate from the Arizona Attorney General's Office.
The modifications are supposed to be made based on how much a homeowner can afford to pay each month.
As part of the changes, adjustable- and negative-amortization loans can be swapped out for fixed-rate mortgages.
Streamlined process
"There will be a streamlined process to look at the loans and meet affordability targets for the borrowers," Simon said. "The borrower has to decide if they are interested."
In early October, the number of pending foreclosures Valley-wide hit a new high of 29,000, according to Information Market, a real-estate research firm that, while conducting its daily analysis of property records, discovered that Countrywide foreclosures had been pulled.
Pending foreclosures are now down by at least 2,000 because of Bank of America's action, and more foreclosures in the Valley are likely to be temporarily halted this month.
"Now, we are asking other big mortgage firms to take on the same obligations to work with struggling borrowers as (BofA)," Goddard said.
"We have asked them to do it voluntarily without us filing a lawsuit, but investigations do continue into fraud and the possible inducement (of homeowners) into some of these mortgages by firms."
Money from the national housing-bailout plan passed last summer will be available in Arizona to help more struggling homeowners next year.
Until then, other big lenders are expected to step up efforts to help borrowers facing foreclosure.
On Friday, JPMorgan Chase announced that it would modify up to $110 million in mortgages nationwide. It expects to assist 400,000 families who need help making their home-loan payments.
"It's a far better solution to have companies working with buyers than foreclosures," Goddard said.
"This is important in getting us out of this mortgage meltdown and getting property values to firm up."
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