You've heard all about the borrowers behind on mortgage payments because their initial low "teaser" interest rates are now going up, or they've taken out a loan that is worth more than their house is now worth. When these borrowers ask their lender to change the written terms of their loan, it's called a loan modification. But often the loan servicer doesn't have the right to say "yes" or "no," that goes higher up the Wall Street food chain to the investor that bought the loan. And that's why most financial institutions haven't been willing to offer a blanket promise to rewrite loans. Bank of America says it now has that authority from its investors, and starting Dec. 1, it will offer loan modifications to more than 400,000 Countrywide borrowers, more than 8,000 of them in Ohio.
Andrea Seidt at the Ohio Attorney General's office says other lenders could join suit.
Andrea Seidt: For over a year now, Ohio and other states have been asking servicers for these streamlined loan mods and there's been a lot of resistance claiming that they don't have the authority. Now that Bank of American has indeed done it, those excuses will no longer hold water.
In addition, Countrywide will pay the 11 states $150 million, with 4.5 million going to Ohio. Seidt says half of that money could go to former Countrywide borrowers that have already lost their homes. The other half could go to cities looking to rebuild after the foreclosure crisis. Mhari Saito, 90.3.