Colorado didn’t sue Countrywide Financial Corp. but still may share in a landmark $8.7 billion settlement between the mortgage lender’s parent company and 11 states, the Colorado attorney general’s office said Monday.
The record agreement settles a handful of lawsuits filed in June by Illinois, California and other states accusing Countrywide of predatory lending practices, including originating unnecessarily risky and costly mortgage loans. The nation’s largest mortgage lender, Countrywide was recently acquired by Bank of America.
The company agreed to pay for loan modifications and other relief for up to 400,000 borrowers nationwide from all 50 states. Homeowners in participating states with subprime loans and other risky products such as payment-option adjustable-rate mortgages are eligible, officials said.
Interest rates on the loan modifications could go as low as 2.5 percent for five years. Pay-option ARM loans will no longer contain the negative-amortization feature, and their principal and interest rates will be reduced, the Illinois attorney general said.
Nate Strauch, spokesman for Colorado Attorney General John Suthers, said Monday that Suthers was reviewing the terms of the settlement before deciding whether to join.
“It’s a question of whether Coloradans would benefit from this settlement or from some sort of independent action,” he said.
It was unclear how many Colorado borrowers would be eligible and how much of the settlement amount would be devoted to them.
California said it would receive $3.5 billion for 125,000 borrowers; Illinois will get $185 million for about 11,000 borrowers; Washington said it would receive $200 million for nearly 10,000 homeowners.
Colorado didn’t join the original group of states suing Countrywide, though Suthers is a member of a foreclosure-prevention working group made up of attorneys general from many of the states that did sue. Strauch said joining the legal action “wasn’t something that was offered to us at that point.”
Greg Griffin: 303-954-1241 or ggriffin@denverpost.com
