17,394
edits
Changes
Financial Crisis of 2008 (view source)
Revision as of 05:08, October 6, 2008
, 05:08, October 6, 2008update on Countrywide
Meanwhile the #4 U.S. bank, Wachovia, burdened by $120 billion in toxic securities,<ref> At the height of the bubble in 2006 Wachovia purchased Golden West Financial, a California lender specializing in so-called pay-option mortgages that enabled people to buy houses for a much higher price than they could afford, hoping that rising house prices would allow them to refinance later.</ref> was bought out by Citigroup on Sept. 29 in a deal engineered by the FDIC. However Wachovia then announced a merger into Wells Fargo, and the matter is in court.
Meanwhile the #4 U.S. bank, Wachovia, burdened by $120 billion in toxic securities,<ref> At the height of the bubble in 2006 Wachovia purchased Golden West Financial, a California lender specializing in so-called pay-option mortgages that enabled people to buy houses for a much higher price than they could afford, hoping that rising house prices would allow them to refinance later.</ref> was bought out by Citigroup on Sept. 29 in a deal engineered by the FDIC. However Wachovia then announced a merger into Wells Fargo, and the matter is in court.
In early October, Bank of America, the new owner of Countrywide, reached a settlement with 11 states that sued it over fraudulent practices. The state of Illinois accused Countrywide of relaxing underwriting standards, structuring loans with risky features, and misleading consumers with hidden fees and fake marketing claims, like a false promise of a "no closing costs loan." Countrywide gave special incentives to its brokers for selling impossible loans by paying higher commissions on them. In reviewing one Illinois mortgage broker’s sales, the Illinois complaint said the "vast majority of the loans had inflated income, almost all without the borrower’s knowledge." Bank of America did not deny the chrages and instead agreed to pay out $8.4 billion to 400,000 Countrywide customers. Countrywide will reduce principal balances for some people and cut interest rates for others. Rates for some people could decline to as low as 2.5% and remain at that level for five years. Fannie Mae, Freddie Mac and IndyMac, now all owned by the federal government, have begun their own programs to modify mortgage terms for some hard-pressed borrowers.
<ref> Gretchen Morgenson, "Countrywide to Set Aside $8.4 Billion in Loan Aid," [http://www.nytimes.com/2008/10/06/business/06countrywide.html?ref=business ''New York Times'' Oct. 6, 2008]</ref>
==See also==
==See also==
[[Henry M. Paulson]]
[[Henry M. Paulson]]