The Countrywide Bait & Switch

The Chicago Tribune reports on Countrywide screwing small borrowers who are now in foreclosure:

In March 2006, they reached what they thought were final terms for the [$54,000] loan: $5,000 down, a 7.75 percent interest rate, fixed for two years and then adjustable for the remaining 28 years, with a cap of 14.75 percent.

The $429 mortgage payments would be higher than they expected, but still within their budget -- equal to less than one week of Steve's salary with CVS. Plus, it was still cheaper than their $700-a-month rent in a suburb of Boston.

Then, on April 20, two weeks before the May 3 closing date, they said they got mortgage documents in the mail with a letter that said they should sign all the papers and return them as soon as possible.

But they quickly noticed the final contract listed a higher interest rate of 12.125 percent, with a cap of 19.125 percent. That pushed the monthly mortgage payments up more than $200 to $692 a month.

"We both said, 'Oh my God!' and started reading page by page," recalled Steve Love.

They called Countrywide and talked to several representatives who told them "that the fluctuating market went up and investors had asked for a higher percentage rate on the loans, and this was the best they could do," he said.

... the couple said they discussed a workout program with the Countrywide representatives that included either reducing their monthly payment or working out a new loan, but each time they were told no and that they had to make their monthly payment or risk losing their home.

"Their view is, 'Pay up or die,'" Donna Love said.

19% is the best loan available at the height of the easy-money bubble in 2006 for a small loan with 10% down and solid income? I don't think so. Countrywide is a bunch of lying loan sharks out to squeeze every penny they can out of the working class.

HT: Calculated Risk.

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