It has been another extraordinary and traumatic day on Wall Street, with the Dow Jones industrials plunging as much as 800 points before closing with a loss of 370. The catalyst for the frantic selling was investors' worries that the credit crisis is likely to be an issue around the world. The Bush administration is starting to implement its $700 billion financial rescue plan.
Treasury Gets to Work on Rescue Plan
The Department of the Treasury this afternoon issued solicitations for money managers to handle the troubled assets acquired under its newly authorized $700 billion rescue plan for financial institutions. The three solicitations - managers of securities; managers of whole loan assets; and custody services.
Proposals for each are due at 5 p.m. EDT Wednesday; selections for custodial and other services will be made on Friday, while selection dates for the other two could not be immediately learned. Treasury officials expect to announce its initial selections sometime next week, according to a news release on its website.
Neel Kashkari was named interim assistant Treasury secretary for financial stability. In this role, he will head the rescue program or Troubled Assets Relief Program (TARP). Mr. Kashkari, currently the assistant secretary for international economics and development, joined the Treasury Department in July 2006 as a senior adviser to Secretary Henry Paulson. Mr. Kashkari previously was a vice president in Goldman Sachs’ San Francisco office.
Bank of America Settles for $8.6 Billion on Countrywide Loans
As part of a settlement with state attorneys general that could be worth as much as $8.6 billion, Bank of America said on Monday it would cut interest rates and principal on some troubled mortgages originated by Countrywide Financial Corp.
Bank of America, which bought Countrywide in July, reached a deal with attorneys general representing 11 states in which it will offer more affordable and sustainable mortgage payments for borrowers who had financed their homes with subprime loans or adjustable-rate mortgages serviced by Countrywide.
The Countrywide settlement will likely become the largest predatory lending settlement in history, the California attorney general's office said in a statement. "With this settlement, homeowners will receive direct relief from the catastrophic damage caused by Countrywide," said California Attorney General Edmund Brown in a statement. "Countrywide's lending practices turned the American dream into a nightmare for tens of thousands of families by putting them into loans they couldn't understand and ultimately couldn't afford," he said.
States including West Virginia, California, Connecticut and Illinois had sued Countrywide over its business practices, alleging that the mortgage lender had made risky and costly loans to consumers who could not afford them.
Countrywide was once the largest U.S. mortgage lender before being acquired for about $4 billion in stock by Bank of America as its risky subprime mortgage loans began to fail.
"We have committed significant resources and developed innovative programs to help as many Countrywide customers as possible stay in their homes," Barbara Desoer, president of Bank of America Mortgage, Home Equity and Insurance Services, said in a statement.
The view on the market was that this was a positive move by Bank of America that will ultimately help both the customer and lender. It was also seen as a move that should start to help stabilize the home markets where the homes are located.
The deal will enable eligible subprime and pay-option mortgage borrowers to avoid foreclosure by obtaining a modified and more affordable loan. The loans covered by the settlement are among the riskiest and highest defaulting loans at the center of America's foreclosure crisis. Pay-option mortgages allowed borrowers to pay only a fraction of interest and principal owed each month, allowing the loan balance to increase.
The deal applies to people who financed their homes with subprime loans or pay-option adjustable-rate mortgages serviced by Countrywide that originated before December 31, 2007. Some 400,000 borrowers could be helped by the agreement.
The program centers around a loan modification process, valued up to $8.4 billion, aimed at providing relief to eligible borrowers who are "seriously delinquent" or are likely to become so due to loan features, such as rate resets or payment recasts.
About 12% of the eligible loans are held by Bank of America and the cost of restructuring these loans is "within the range of losses we estimated when we acquired Countrywide," Bank of America said.
Under the program, eligible Countrywide-serviced customers who occupy the home as their primary residence will not be charged loan modification fees, and prepayment penalties for subprime and pay-option ARM loans will be waived, the bank said.
Some $150 million has been set aside for borrowers in certain states who suffered foreclosure or are at serious risk of foreclosure, the bank said. An additional $70 million has been set aside for relocation assistance to borrowers unable to retain their homes.
Attorneys general in 11 states, including Arizona, California, Connecticut, Florida, Illinois, Iowa, Michigan, North Carolina, Ohio, Texas and Washington, are participating in the settlement.
The settlement does not include Angelo Mozilo, the former chairman and chief executive of Countrywide Financial Corporation or David Sambol, formerly the president of Countrywide Home Loans and president and chief operating officer of Countrywide Financial Corporation.
Sources: Yahoo, Reuters, U.S. Department of Treasury, Pensions & Investments
Treasury Gets to Work on Rescue Plan
The Department of the Treasury this afternoon issued solicitations for money managers to handle the troubled assets acquired under its newly authorized $700 billion rescue plan for financial institutions. The three solicitations - managers of securities; managers of whole loan assets; and custody services.
Proposals for each are due at 5 p.m. EDT Wednesday; selections for custodial and other services will be made on Friday, while selection dates for the other two could not be immediately learned. Treasury officials expect to announce its initial selections sometime next week, according to a news release on its website.
Neel Kashkari was named interim assistant Treasury secretary for financial stability. In this role, he will head the rescue program or Troubled Assets Relief Program (TARP). Mr. Kashkari, currently the assistant secretary for international economics and development, joined the Treasury Department in July 2006 as a senior adviser to Secretary Henry Paulson. Mr. Kashkari previously was a vice president in Goldman Sachs’ San Francisco office.
Bank of America Settles for $8.6 Billion on Countrywide Loans
As part of a settlement with state attorneys general that could be worth as much as $8.6 billion, Bank of America said on Monday it would cut interest rates and principal on some troubled mortgages originated by Countrywide Financial Corp.
Bank of America, which bought Countrywide in July, reached a deal with attorneys general representing 11 states in which it will offer more affordable and sustainable mortgage payments for borrowers who had financed their homes with subprime loans or adjustable-rate mortgages serviced by Countrywide.
The Countrywide settlement will likely become the largest predatory lending settlement in history, the California attorney general's office said in a statement. "With this settlement, homeowners will receive direct relief from the catastrophic damage caused by Countrywide," said California Attorney General Edmund Brown in a statement. "Countrywide's lending practices turned the American dream into a nightmare for tens of thousands of families by putting them into loans they couldn't understand and ultimately couldn't afford," he said.
States including West Virginia, California, Connecticut and Illinois had sued Countrywide over its business practices, alleging that the mortgage lender had made risky and costly loans to consumers who could not afford them.
Countrywide was once the largest U.S. mortgage lender before being acquired for about $4 billion in stock by Bank of America as its risky subprime mortgage loans began to fail.
"We have committed significant resources and developed innovative programs to help as many Countrywide customers as possible stay in their homes," Barbara Desoer, president of Bank of America Mortgage, Home Equity and Insurance Services, said in a statement.
The view on the market was that this was a positive move by Bank of America that will ultimately help both the customer and lender. It was also seen as a move that should start to help stabilize the home markets where the homes are located.
The deal will enable eligible subprime and pay-option mortgage borrowers to avoid foreclosure by obtaining a modified and more affordable loan. The loans covered by the settlement are among the riskiest and highest defaulting loans at the center of America's foreclosure crisis. Pay-option mortgages allowed borrowers to pay only a fraction of interest and principal owed each month, allowing the loan balance to increase.
The deal applies to people who financed their homes with subprime loans or pay-option adjustable-rate mortgages serviced by Countrywide that originated before December 31, 2007. Some 400,000 borrowers could be helped by the agreement.
The program centers around a loan modification process, valued up to $8.4 billion, aimed at providing relief to eligible borrowers who are "seriously delinquent" or are likely to become so due to loan features, such as rate resets or payment recasts.
About 12% of the eligible loans are held by Bank of America and the cost of restructuring these loans is "within the range of losses we estimated when we acquired Countrywide," Bank of America said.
Under the program, eligible Countrywide-serviced customers who occupy the home as their primary residence will not be charged loan modification fees, and prepayment penalties for subprime and pay-option ARM loans will be waived, the bank said.
Some $150 million has been set aside for borrowers in certain states who suffered foreclosure or are at serious risk of foreclosure, the bank said. An additional $70 million has been set aside for relocation assistance to borrowers unable to retain their homes.
Attorneys general in 11 states, including Arizona, California, Connecticut, Florida, Illinois, Iowa, Michigan, North Carolina, Ohio, Texas and Washington, are participating in the settlement.
The settlement does not include Angelo Mozilo, the former chairman and chief executive of Countrywide Financial Corporation or David Sambol, formerly the president of Countrywide Home Loans and president and chief operating officer of Countrywide Financial Corporation.
Sources: Yahoo, Reuters, U.S. Department of Treasury, Pensions & Investments
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