Countrywide Home Loans, who used to be the largest home mortgage lender before being acquired by Bank of America, reached a settlement agreement with several state’s Attorneys General regarding their huge pool of subprime loans.
One of the tenets of that agreement is that Countrywide will proactively modify 400,000 loans to more “reasonable” terms.
But that’s easier said than done. According to my research, many of the loans Countrywide made are owned by outside investors who were not party to the agreement Countrywide made and are balking at taking less money than they are owed.
In fact, Mr. William Frey is suing to prevent Bank of America (owner of Countrywide) from performing the loan modifications since, according to Frey, doing so is in violation of the contracts that investors hold with Countrywide.
So who is right? Mr. Frey, who advocates that contract law should be followed in this and every case? Or BOA/Countrywide/Attorneys General whose agreement requires that this circumstance be judged as an exception to contract law?
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It’s a tough pill to swallow but that Frey guy is doing exactly what he should. Otherwise, he’s effectively allowing the government to force him into taking less money than he deserves.
Maybe Frey should apply for some of the bailout money.
Where does it end? Those idiots in Washington are doing their best to make CORPORATE WELFARE as prevalent as normal welfare. It’s sick.
If, in fact, Mr. Frey is a direct investor, then contract law should be followed. But if Mr. Frey merely “invested” in a derivative…of a “pool”, he should be found without standing to sue for specific performance.
Just another example of our “so-called Government ” trying to take control of our everyday business decicsions .
Ahhh the further joys of the packaging and re-packaging of these loans made out…
When so many people now have their hands in the proverbial cookie jar…
And they all want their fair share…
But don’t want to get in trouble still for such or sued for it…
Otherwise they sue back…
Such a tangled web that we weave…:)
Other investors have lost huge money in the stock market, with no recourse. If Mr. Frey isn’t named on the title than he should take his lumps like the rest.
Interesting point – but not a rational comparison. One invests money in the stock market without a contractual rate of return. The same is not true of mortgage investing. — Bryan Ellis
If he is named on the title than he allowed countrywide as his agent to perform unwise, unfair, or illegal lending practices. I am all for upholding the law, but I don’t want to see the USA in the crapper becuase of people like him.
Making loans to people with little hope of honoring the terms and payments is a criminal enterprise. Break your legs, foreclose on your home, is there a difference?
Maybe Mr. Frey should be charged under the “Rico” Statutes, and agree to rewrite the loans as part of a plea bargain
No one is right any more!! We are past the time when this could be fixed in a reasonable manner and pretty much everything is screwed up beyond repair.
We are now in a wait and see what happens next situation. Another new article was just on the air about 2009 will have a record number of ARMs change and with the large devalue on houses people are largely screwed. There has been and still is a lot of talk about credit and freeing up credit, but for many of us the damage done by Frank, Pelosi and others with regulations making the banks perform in a manner that can have only one outcome, is already too much and too great for us to survive in any reasonable manner.
Right now Pelosi is talking about how we have to do what she wants with the Big 3 car companies because she knows best and we need to do as she says. What a bunch of crap!!
The politicians are screwing us and too many idiots in this country are happy they are doing it. If anyone thinks they won’t be affected by what is going on they must be living under a rock.
William Frey it not the first one to bring a suit and won’t be the last. All we are seeing now is no one wants to be the biggest loser in this mess and no one is really going to be rescued, not now, not later, not ever!
You and I can be thrown to the wolves, we can be ruined, we can be taxed to death and told it is for the good of the …. Wait a minute for the good of who, I am no longer sure. I think for the good of the politicians, yes I think that is what I am hearing any more, for the good of the politicians.
That is what I call a policy of change alright, money changes from my hand to some politicians hand.
This lawsuit (which is only the first of many to come) is being filed as a means to an end. Do the investors think that B of A has the talent necessary to modify 400,000 loans while adequately keeping the investors interests at heart. No. So the suit is a strategy to make sure that the investors will be part of the process. They know that modifications are better than foreclosures but they want to make sure that B of A doesnt give away the farm. Who can blame them? And if you happen to be in the business and you’re not doing modifications, what are you waiting for? Modifications are good for everyone – homeowners, investors, mortgage and real estate professionals. Get involved and help get these modifications through the system. The quicker it happens the quicker we’ll have a stable market again.
Clearly Mr. Frey had an opportunity to conduct due diligence on the “paper” he was buying. He therefore knew or should have known that what he was acquiring were potentially toxic loans or at the very least had a very strong probability of becoming toxic loans upon default. He may have a remedy against BofA and/or Countrywide for breach of his contract(s) with them. It will be almost impossible for him to prove his damages, which means his case should be dismissed early.
I fail to see where he has any legal or equitable basis to obtain what would amount to injunctive relief to prevent BofA/Countrywide from complying with the terms of a civil enforcement agreement presumably signed off by the Judge to whom the case was assigned. brought by I believe 9 or 10 or more state AG’s against them for having initiated, underwrote and disseminated these option ARM and related loans to sub-prime borrowers (many of whom knew exactly what they were doing and many were taken advantage of) Once these modifications are completed, Frey may have a claim against BofA/Countrywide for damages representing the difference between what Frey is receiving on the modified loans vs what Frey would have received under the pre-modified loans BUT that will be a very hard case to make because those damages, if any will be far too speculative to prove in court. In fact Frey may even come out better from an ROI standpoint with the modified loans. Also you have to consider what the other noteholders intend to do–if they do not jump on board what appears to be a weak case, and they hold the status quo, there may be very inconsistent returns based on the same type of loan product.
Bryan.
I guess I wanted to know if he is a lein holder to the properties in question. If countrywide went bankrupt does he have a right to the real properties? If not then perhaps his rate or return would have been reset by a bankruptcy Judge anyway.
things are so scary now many people will do well to preserve their investment/principal. Rate of Return is less of a concern.
I Don’t know MR. Frey no wish him ill. His suit to protect his return seems to me like fiddiling while Rome burns
Investors should have the final say in a loan they own, period.
Servicers perform a much needed service for the investor, however, they are just an intermediary. The fact that Countrywide posted the 400,000 loan target on their website perhaps without the consent of the investors is a sign of the times, unfortunately. The lack of accountabilty is without precedent in this nations history in my opinion.
PS
Ron Berg put it better than I was able. I hope he is correct that the suit is just a means to get a seat at the bargaining table
Mr Frey is entirely within his rights to sue. However, I don’t think he can stop the modification. He may still be entitled to the difference, unless he becomes a party to the mod. The loan mod is a mitigation exercise. If the loan were not modified, then the loss is expected to be even greater at some future point. The bank is making an attempt to clean up the balance sheet, get rid of another time consuming file and move on to more profitable business. Indeed they should be. If they can modify and come out ahead of a projected REO pricing, that is a good business decision. The loss may still have to be dealt with at the investor level.
Now we’ll have to see what that does to the market.
Sounds like this savvy investor Mr. Frey is over his head with worry, & he should be! I used to be a CountryWide customer until they foreclosed on my property in June 2008. Mr. Frey was probably the investor that the countrywide reps would speak of & tell me that the (INVESTOR)would not approve the loan modifications that were suppose to be available to me! He probably did not realize that he bought a loan (probably in BULK) that had a mortgage of $1174 per month & my income was Soc Sec of $1338 a month with an adjustable rate. Whoever the investor was, he should have done his due diligence at the time he made the commitment to invest in real estate whether one home at a time or several or in his case (MANY)! Well, my house is still sitting on the market now for over 6 months & I have contacted the listing agent with a Letter of Intent & a Letter of Explanation to see if CountryWide would be willing to put me back in the house at the amount that I originally owed them, keep your fingers crossed. (oh, by the way, with the new loan modification program that rolled out on Dec 1, 2008, that was going to help current & previous countrywide customers who are facing and/or been foreclosed upon, I missed being qualified by 60 days!!!)