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Countrywide Sued Over Denied Modification

February 17th, 2009 12:37 PM by Lehel Szucs

Countrywide Sued Over Denied Modification
Raymond v. Countrywide

January 15, 2009

By MIKE STUCKEY
Senior News Editor for msnbc.com

Attorneys for a couple who became delinquent on their mortgage and
were subsequently foreclosed on are accusing Countrywide Home Loans
of claiming in public to be pursuing a diligent loan modification
strategy while denying legitimate modification requests.
In marketing, advertising and testimony before Congress, Countrywide
Home Loans has said repeatedly that it is working hard to modify the
mortgages of financially strapped borrowers caught up in the
subprime meltdown. But in a New Hampshire court, attorneys for the
lending giant are singing a different tune, describing such
assurances as "mere commercial puffery."

Saying the modification offers are "only Countrywide's vague
advertisements," attorneys for the lender are asking the court to
throw out a lawsuit alleging breach of good faith, fraud, negligence
and misrepresentation, which was filed on behalf of a family that
was refused a loan modification by the Calabasas, Calif.-based
company.

"It's breathtaking," attorney Mary Frances Stewart of Concord, N.H.,
said of Countrywide's response to the lawsuit she and co-counsel
Krista Atwater filed in Merrimack County Superior Court. In its
response, "Countrywide is saying, 'We don't have any obligation or
even necessarily the intention of actually modifying these loans,'
and yet they're representing that they do."

The inability of many troubled borrowers to get viable modifications
of mortgages they can no longer afford is seen by many economists as
major impediment to a solution to the mortgage crisis, which is
expected to result in more than 2 million home foreclosures this
year.

The mortgage industry, eager to avoid legislation allowing
bankruptcy judges to rewrite home mortgages and to maintain the flow
of taxpayer bailout funds, says it is working hard to modify as many
loans as possible to help homeowners avoid that ruinous result.

But many attorneys representing troubled borrowers say those
assurances are belied by the actions of lenders like Countrywide,
which are really doing very little to help distressed borrowers stay
in their homes.

The New Hampshire lawsuit casts that dispute in a new light, with
attorneys representing the company echoing the arguments of
Countrywide's courtroom opponents.

Gary and Jessica Raymond are the plaintiffs in the suit, which seeks
unspecified damages. The Raymonds say they lost the home of their
dreams in Canterbury, N.H., after Countrywide strung them along for
eight months in the belief their loans could be modified. They say
the company then flatly rejected their efforts to negotiate an
interest-rate cut.

"The one thing we wanted was to save the house," Jessica Raymond,
30, told msnbc.com. "We never imagined ... that we'd be sitting here
in a lawsuit and talking to a reporter about it."

An attorney with Goodwin Procter, the Boston law firm handling the
case for Countrywide, referred inquiries to the financial company's
public relations department, which did not reply to msnbc.com's
request for comment.

Representatives of the Financial Services Roundtable, a trade group
that counts Countrywide owner Bank of America Corp. among its
members, did not respond to an e-mail request for comment on the
lawsuit. But Scott Talbott, the group's senior vice president for
government affairs, told msnbc.com last week that "the industry is
working very hard to work with homeowners to prevent delinquencies
from becoming foreclosures. Nobody wins in a foreclosure."

Countrywide Home Loans was a division of Countrywide Financial
Corp., which in 2007 was the nation's largest mortgage lender and
serviced $1.4 trillion in loans. It was labeled "the company perhaps
most responsible for the mortgage crisis" by Rep. Henry Waxman, D-
Calif., chairman of the House Committee on Oversight and Government
Reform. Waxman last year blasted the company's executives for taking
astronomical salaries and bonuses as Countrywide's stock plummeted
amid staggering losses from an orgy of subprime lending. The losses
ultimately led to Countrywide's sale last year to BoA. Meanwhile,
attorneys general from states across the nation sued Countrywide
over deceptive lending practices before 15 of them negotiated an
$8.4 billion settlement on behalf of borrowers in the fall.

According to the Raymonds' lawsuit, Countrywide was the loan
servicer for the couple's first mortgage and an equity line of
credit that totaled a little over $230,000. Proceeds from the loans
were used to purchase a new Cape Cod-style home on a quarter-acre
lot in December 2004, and then finish the upstairs.

"We were really excited about it," said Jessica Raymond, a stay-at-
home mom with two daughters, who are now 2 and 5. "It was our first
house. We got to pick our colors."

Since they'd never bought real estate before, they were unfamiliar
with some aspects of the purchase and wound up with adjustable loans
with interest rates that could climb as high as 12.8 percent on the
first mortgage and 18 percent on the equity loan.

"We didn't know anything about it," Jessica Raymond said. "The
mortgage broker we worked with was saying, 'Don't worry, this is a
temporary thing, we just want to get you into the house and we'll
redo it later.'"

By July 2007, behind on their payments, which had increased by $700
a month, the Raymonds "proactively contacted Countrywide to see if
they could negotiate a temporary or permanent solution that would
address their potential delinquency," according to the lawsuit. They
were given a repayment plan -- not loan modifications -- requiring
them to pay $2,859 a month for six months to bring the loans
current, it said. After four months, they gave up.

Gary Raymond, 32, an electrician, said he "was working astronomical
hours to save the house," both at his regular job and on side jobs.
Their family life began to suffer and again they asked Countrywide
for a modification, the Raymonds say.

The couple and their attorneys say that request triggered an eight-
month procession of calls, faxes and letters between the couple and
Countrywide that the Raymonds' lawsuit recounts in seven single-
spaced typewritten pages. During that time, they filed a Chapter 13
bankruptcy petition. They allege that Countrywide employees told
different stories about whether they could get their loans modified
and what they needed to do. They were asked to send the same
documents over and over, they say, by a constantly shifting set of
Countrywide employees who rarely returned their phone calls.

Attorney Stewart said the Raymonds' careful documentation of their
case was one reason she decided to take it on.

"It's not like he lost his job, it's not like they weren't paying
their mortgage," she said. "They did get behind. ... [but] they did
everything they were told to do. ... They called all the time, every
night, every other night, every three nights. They didn't sit back.
He was working two jobs trying to keep up with this house."

Finally, in June 2008, after converting to a Chapter 7 bankruptcy,
the Raymonds moved out of the house.

In their responses to the lawsuit filed with the court,
Countrywide's attorneys deny nearly all the allegations made by the
Raymonds -- even including the contention that Countrywide was in
the mortgage servicing business and had knowledge of the couple's
payment history on their loans. A key defense to the larger issues
raised in the suit is that "loan modification was not mentioned nor
even contemplated" in the loans the Raymonds signed, according to
court documents.

Stewart acknowledged that the loans did not include a modification
provision, but said that "through media, correspondence and
solicitations, including multiple requests for financial
documentation and loan modification application, Countrywide has a
contract and common law duty to follow-through with the process in
good faith."

Those offers remain easy to find today, with Countrywide telling its
borrowers "we can help you" get a loan modification in big red
letters on its Web site. Countrywide is a member of the Hope Now
Alliance, which the Raymonds' lawsuit notes has been "trumpeted by
the mortgage industry as an effective response to the foreclosure
crisis."

And Countrywide executives have testified before Congress that the
company is ready and eager to assist troubled borrowers.

"I want to underscore ... what is perhaps the most important goal
going forward -- to keep families in their homes," Countrywide
founder and then-CEO Angelo Mozilo told Waxman's panel last spring
as the Raymonds were waiting for word on their loan modification
request. "We have substantially enhanced our efforts to assist
financially distressed homeowners to keep their homes."

Those words ring hollow for the Raymonds, who are trying to make a
fresh start in a rent-to-own house in a new town.

"We were paying $3,000 a month for a house that should have been
$1,400," Gary Raymond said, pointing out that the couple never
sought a reduction in the amount of money they owed, just a lower
interest rate.

Gary Raymond speaks with amazement as he notes that instead of
working out a deal with him and his wife to get back the full
$233,000 owed on the house, Countrywide has possession of a property
that is now probably worth less than half that. The company hasn't
received a payment in over a year. The house sits abandoned, its
plumbing frozen in the New England winter, as real estate prices
continue to fall with the snow.

"It's very heartbreaking," Jessica Raymond said.

Posted in:General
Posted by Lehel Szucs on February 17th, 2009 12:37 PM

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