Homeowner group slams Countrywide
No. 1 mortgage lender not doing enough to help customers facing foreclosure, group says; Countrywide fights back.
NEW YORK (CNNMoney.com) -- Countrywide Financial, the nation's biggest home lender and one of those most affected by the subprime mortgage crisis, found itself the target of stinging criticism Thursday from an organization trying to help homeowners in peril.
The Neighborhood Assistance Corporation of America said Countrywide (Charts, Fortune 500) was not doing enough to help people who took out subprime adjustable-rate mortgages (ARMs) over the past few years and now may lose their homes. Subprime loans are issued to borrowers with poor credit histories who often lack the funds to make large down payments.
Millions of homeowners are considered at risk of foreclosure as adjustable-rate mortgages reset at higher interest rates over the next year or so. NACA has committed $1 billion to helping some of those borrowers by refinancing their mortgages, but says it can't meet its goals unless lenders like Countrywide cooperate.
NACA CEO Bruce Marks called on Countrywide to take more active steps to provide its borrowers with terms they can meet to help them keep their homes, something Countrywide said it is already doing.
"What we need to do is require Countrywide, and all the other lenders, to offer a product that promotes long-term home ownership and stability," Marks said at a news conference. "Stability comes from knowing what you can afford and what the mortgage payments will be."
But Countrywide, which benefited Thursday from a $2 billion investment from Bank of America (Charts, Fortune 500), countered that it employs 2,600 "home retention specialists" who so far this year have kept 35,000 homeowners out of foreclosure.
"For many years, Countrywide has been and we continue to be an industry leader in workout solutions," the company said in a statement. "For borrowers that respond to our contact efforts and have the financial ability and willingness to stay in their home, we have tools available to resolve their situation."
NACA leaders also criticized Countrywide for charging exorbitant fees to borrowers and not cooperating with NACA in renegotiating terms. NACA expects to be able to refinance only about 7,000 mortgages with the funds it has so it's also trying to renegotiate financing terms with lenders, said Erick Exum, the group's national director.
NACA's comments brought criticism elsewhere within the lending industry. An official at the American Financial Services Association said NACA's news conference was counterproductive in the effort to stem the subprime crisis.
"Lenders, policymakers, consumer organizations and borrowers are equally concerned about rising foreclosures and other issues facing the mortgage industry today," said Bill Himpler, executive vice president for industry group. "All of these parties should be at the same table to find workable approaches to these issues while preserving liquidity in the marketplace.
"NACA's news conference, however, does nothing to achieve this goal. To the contrary, it is a distraction to those who are dedicated to finding ways to address serious concerns."
Countrywide said it has worked with NACA counselors on 28 cases this year alone and is willing to do more. Exum, though, said Countrywide has been uncooperative in most cases.
Marks said it's important to bring to light the importance of lenders working with distressed borrowers, several of whom spoke at the news conference and said they were hoodwinked by Countrywide into thinking they would have no trouble refinancing ARMs that were due to reset with higher rates.
"This is a crash, but it is in slow motion," Marks said. "Massive foreclosures do not need to happen. There is still time to prevent them. Borrowers are not asking for a handout, all they are asking for is to make their mortgages affordable."
Both Countrywide officials and Himpler countered that lenders don't profit from foreclosures. Countrywide said it is working with more than 60 counseling agencies across the country to help borrowers.