US mortgage giant Countrywide Financial said on October 23 it was offering new terms to help stave off foreclosure for tens of thousands of customers, with loans totalling around 16 billion dollars.
America's biggest mortgage company said the "unprecedented" effort was aimed at ensuring that borrowers facing a threat of foreclosure could remain in their homes even as adjustable rate loans are "reset" to the latest market rates.
"Countrywide believes that none of our subprime borrowers that have demonstrated the ability to make payments should lose their home to foreclosure solely as a result of a rate reset," said Countrywide president and chief operating officer David Sambol.
US Treasury Secretary Henry Paulson warned a week ago that over one million American homes could be repossessed by lenders and banks this year because of a sharp downturn in the nation's housing market.
Over half of the expected foreclosures are likely to be related to "subprime" mortgages, which were aggressively marketed to Americans with stretched finances during the housing boom which petered out in early 2006.
Many subprime mortgages, initially granted with low "teaser" interest rates, are due to be reset in coming months, sparking fears that even more Americans with scant savings will be unable to meet their mortgage payments. Sambol said Countrywide was "committed to helping its customers sustain homeownership."
The home lender said it plans to refinance and modify 16 billion dollars worth of home loans in a bid to lessen the likelihood that its customers could be pitched into foreclosure.
Countrywide said it had established a special refinance unit, which will contact 52,000 borrowers to offer various refinancing options. The effort will target customers with subprime loans who have a good payment history. The mortgage behemoth said it will also reach out to 20,000 borrowers, who could find it hard to meet mortgage payments if their interest rates increase, to help them modify their loans.
Countrywide said it was also moving to offer "pre-determined, pre-approved rate reductions" to around 10,000 borrowers who are struggling to pay their mortgages or have fallen behind with payments.
The troubled mortgage firm said similar efforts had already enabled over 70,000 borrowers to either refinance their home loans or stay in their homes. The mortgage lender has been forced to lay off thousands of workers and seen its business ravaged by falling mortgage demand and an industrywide liquidity crunch. It was forced to borrow 11.5 billion dollars from 40 banks in mid-August to underpin its stressed finances.
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