Senator urges Countrywide to help borrowers

Posted by charles dennis

September 14, 2007

Aug. 29 (Bloomberg) — U.S. Senator Charles Schumer called on Countrywide Financial Corp. to waive prepayment penalties, refinance loans and eliminate “above-market fees” to help homeowners struggling to make payments on subprime mortgages.

Countrywide, the biggest U.S. mortgage lender, should stop paying higher commissions to brokers who steer borrowers to high-cost loans that “are designed to fail,” Schumer told reporters in Washington today.

“I am calling on Countrywide, as our nation’s largest lender, to bury its bad business practices and reverse some of the damage it has already inflicted on our housing market,” the New York Democrat said.

Schumer, a member of the Senate Banking Committee, has been among the most vocal lawmakers seeking tighter restrictions on mortgage brokers. He introduced legislation in May to set U.S. standards for brokers, including requiring them to assess a borrower’s ability to repay at a loan’s highest interest rate.

“Countrywide’s most lucrative brokers are those that make bad loans that are largely designed to fail the borrower,” Schumer said. The company’s brokers can earn an extra 1 percent of the loan value in commission by adding a three-year prepayment penalty to loans, the senator said.

Countrywide’s Rebuttal

Schumer’s criticism was rebutted by Countrywide, which said in a statement released today that it forbids employees to steer borrowers who qualify for prime loans into subprime loans.

“The majority of consumers who come through Countrywide’s retail subprime channel receive a prime loan,” the lender said in the e-mailed statement. Full Article.