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Mortgage modifications part of Countrywide settlement

Mortgage modifications, restitution, and relocation aid part of $6.5 million settlement to help Countrywide's foreclosed homeowners.

Countrywide Banking and Home Loans, pictured here in Pasadena, Calif. in this 2007 file phote, become a $500 billion home loan machine with 62,000 employees, 900 offices, and assets of $200 billion, before it was bought by Bank of America. On Wednesday, California filed a settlement over predatory lending practices with Countrywide, which includes $6.5 million that will help homeowners with mortgage modification and other aid.

Valerie Macon/SIPA/Newscom/File

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The state of California has reached a settlement in a predatory lending lawsuit against former executives at Countrywide Financial Corp. that will pour $6.5 million into a fund to help foreclosed homeowners.

The state had sued Countrywide, CEO Angelo Mozilo and President David Sambol under former Attorney General Jerry Brown. The 2008 lawsuit alleged that the company lured borrowers with low "teaser" rates on adjustable rate loans. Loan officers didn't tell borrowers that the rates would jump, that prepayments would be penalized, and the total loan costs would skyrocket, even if they made additional payments, the state alleged.

The settlement filed Wednesday in Los Angeles Superior Court says Countrywide agreed to pay $6.5 million to a Foreclosure Crisis Relief Fund. It will provide restitution, mortgage modifications and relocation assistance for foreclosed homeowners, plus money for state and local agencies to prosecute mortgage fraud, Attorney General Kamala Harris said.


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