Crook Alert--Can these Mortgages Be Saved? by Gretchen Morgensen in the NYT

Countrywide Financial Corporation

Gretchen Morgensen exposes the misleading claims and seedy practices of Countrywide Financial Corporation, the nation's largest home mortgage originator and servicer. The company has made innacurate public claims about it's program allowing it's mortgage customers workouts rather than home foreclosures. In actuality it apparently imposes excessive fees, and un-needed flood insurance and other costs which make it harder, not easier, for homeowners to avoid foreclosure.

In one case reported by Gretchen Morgensen, an agreed-upon workout plan was canceled after a payment was two days late.

Borrower advocates fear that fees imposed during periods of delinquincy and even foreclosure can offset losses that lenders and servicers incur. Few Borrowers know, for example, that when they make only partial payments on their mortgages, servicers do not credit those payments against the principal or interest on their loan. INSTEAD, THE PARTIAL PAYMENTS ARE DEPOSITED INTO A SO-CALLED SUSPENSE ACCOUNT. SERVICERS CAN DIP INTO INTO THESE FUNDS AS INTEREST-FREE LOANS, ALTHOUGH THE FUNDS HAVE TO BE ACCESSIBLE WHEN THE BORROWER BECOMES DURRENT ON PAYMENTS. IN THE MEANTIME, BORROWERS--WHETHER OR NOT THEY KNOW IT--ARE STILL ZAPPED WITH FEES AND CHARGES FOR DELINQUENT MORTGAGE PAYMENTS.

"THE FORECLOSURE PROCESS IS A PROFIT OPPORTUNITY FOR SERVICERS AND LENDERS, BUT THERE IS VERY LITTLE OVERSIGHT OF THE FEES IMPOSED," SAID MICHAEL cALHOUN, PREDIDENT OF THE CENTER FOR RESPONSIBLElENDING. "THERE ARE A LOT OF FOLKS TRYING TO SQUEEZE DISTRESSED BORROWERS."

Bruce Marks, founder of the Neighborhood Assistance Corporation, characterizes Country wide as the lender most unwilling to help borrowers.

The national foreclosure wave, meanwhile, may soon become a tsunami. Some $120 billion in adjustable-rate mortgages are scheduled to reset at higher interest rates in the next three months. Subprime, adjustable-rate mortgages make up about $90 billion of that.

Read Gretchen Morgenson's excellent article here:

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