Hearings sought on Countrywide buyout
LOS ANGELES - Consumer groups in four states asked congressional banking and finance committees on Friday to conduct hearings on Bank of America Corp.'s proposed $4.1 billion buyout of struggling mortgage lender Countrywide Financial Corp.
The groups sent letters requesting that lawmakers investigate the possible impact of the buyout on Countrywide borrowers.
They also want lawmakers to press the companies to explain how borrowers having trouble making mortgage payments and those at risk of falling behind when adjustable rates reset can keep their homes.
Consumer groups from California, New York, New Jersey and North Carolina signed off on the letters sent to the Senate Banking Committee and the House Financial Services Committee.
"Congress has a one-time opportunity to take millions of current homeowners out of financial jeopardy and stabilize the financial well-being of countless neighborhoods," Alan Fisher, executive director of the California Reinvestment Coalition, said in a statement.
Charlotte, N.C.-based Bank of America agreed to acquire Calabasas-based Countrywide last month in an all-stock deal expected to close in the third quarter.
Countrywide declined to comment but issued a statement noting it is preparing to disclose information pertaining to the proposed buyout prior to shareholders voting on the deal.
Bank of America spokesman Scott Silvestri said the company has been in talks with a wide range of community organizations, as well as members of Congress "as we all seek solutions to help borrowers in the current environment."
Countrywide has been struggling since last summer, when home-loan delinquencies started to pile up and investors' demand for mortgage-backed securities all but evaporated.
The company posted losses totaling $1.6 billion the last six months of 2007.
Declining home values prompted the company to warn this week that about 122,000 borrowers with home equity lines of credit could be denied further access to their credit lines.
Earlier this month, Countrywide said it helped more than 81,000 borrowers keep mortgage payments manageable in 2007 as part of a stepped-up campaign to stem growing defaults and foreclosures.
The company, which was servicing more than 9 million loans as of Dec. 31, said it worked with borrowers to modify loan terms, work out long-term repayment plans or take other actions.
That's not enough, the consumer groups argued, calling for Countrywide borrowers at risk of foreclosure to receive affordable, fixed-rate loans.
"There should be a plan for these borrowers now that deals with (defaults) ... so people are able to get out of these loans and stay in their homes," Fisher said in an interview.
If Bank of America slashes Countrywide's work force after it takes over, that could slow down the loan modification process, Fisher noted.
On Friday, Bank of America shares rose 88 cents, or 2 percent, to close at $45.03. Shares of Countrywide added 64 cents, or 9.2 percent, to $7.60.
