Transcripts

Countrywide Financial Joins Forces With ACORN

PAUL KANGAS: Tomorrow Countrywide Financial will join other lenders and Treasury Secretary Henry Paulson to announce a new foreclosure prevention program. Today Countrywide struck a deal with community group Acorn that also helps troubled borrowers avoid foreclosure. Instead of just modifying loans for sub-prime borrowers with adjustable interest rates, this agreement helps homeowners with delinquent and fixed rate home mortgages. Stephanie Dhue reports.

STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: As the nation's largest sub-prime lender, Countrywide is under increasing pressure to work out more troubled loans, not just the sub-prime loans whose interest rates will reset. Acorn DC President Marcel Reid says this should help entire neighborhoods.

MARCEL REID, DC PRES., ASSOCIATION OF COMMUNITY ORGANIZATION FOR REFORM NOW: Our members suffer so from these loans and with us, it devastates entire communities. It isn't just restricted to the single house that's foreclosed on, but it affects the property values of all the homes that are around there and eventually our entire communities fall apart.

DHUE: Much of the industry, including Countrywide, has already signed onto the Treasury-backed Hope Now Alliance agreement, which freezes the interest rates on some adjustable rate loans. On a conference call this afternoon, Countrywide's Michael Gross says the company will now also modify fixed rate loans.

VOICE OF MICHAEL GROSS, MANAGING DIRECTOR, LOAN ADMINISTRATION, COUNTRYWIDE FINANCIAL: In the case of fixed rate loans, where the borrower is having trouble during that fixed-rate period, then we will be again evaluating what that borrower's financial circumstances are and attempting to customize a solution that is appropriate for their needs.

DHUE: But banks are still foreclosing. An analysis by the Center for Responsible Lending shows for every one sub-prime loan modification, there are 13 foreclosures. The Center's Eric Halpern says Countrywide's work out record is unimpressive.

ERIC HALPERN, CENTER FOR RESPONSIBLE LENDING: Instead of modifications, we've been seeing repayment plans out of them. In general there's been very few modifications coming through from Countrywide and this agreement, to the extent that it's just an extension of previous agreements, we would need -- is not enough for us to see a big change in Countrywide's behavior.

DHUE: Regulators and lawmakers say they expect the industry to pick up the pace of loan modifications. If that voluntary approach doesn't work, the industry may be forced to work out loans through the bankruptcy courts. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.