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Countrywide launches program to refinance or modify mortgages

LOS ANGELES — Countrywide Financial Corp., the nation's largest mortgage lender, said Tuesday it will begin calling borrowers to offer refinancing or modifications on $16 billion in loans whose interest rate is set to adjust by the end of 2008. Its shares fell more than 4 percent.

Countrywide has been under fire since early July — it has had difficulties with loan financing, its chief executive has been criticized for selling hundreds of millions of dollars in stock and it faces pressure from the government to help keep people from losing their homes.

"Unprecedented times call for unprecedented remedies," Countrywide President and Chief Operating Officer David Sambol said in a statement. "We are determined to assist borrowers who have the willingness and wherewithal to remain in their homes, but need a little help to do it."

The Calabasas, Calif.-based company said it would reach out to borrowers who are current on their loans but are facing an imminent rate reset to discuss options. Countrywide said it would refinance about $10 billion in loans and modify another $4 billion.

It also plans to contact borrowers of some $2.2 billion who are late on their loans and having trouble paying because of a recent rate reset.

In total Countrywide's plan would reach out to about 82,000 borrowers for some kind of relief.

Subprime mortgages — those made to people with poor credit histories — have become a problem for the global economy. As people who took out subprime mortgages from 2005 through the first half of 2007 defaulted at increasing rates, bonds backed by those mortgages began to lose value.

More than 50 mortgage lenders have gone out of business this year. A seizure in the global credit markets precipitated by the mortgage crunch has led a consortium of banks to propose a fund of up to $100 billion to buy distressed assets.

So far this year, Countrywide has completed about 20,000 loan modifications — a figure that represents less than 5 percent of the more than 500,000 loans the lender reports were behind in payments as of last month.

The figure amounts to about 24 percent of the roughly 82,000 loans the company said were in foreclosure as of September.

Still, the company notes that its efforts to help troubled borrowers through refinancing, loan modification, repayment plans and other loan workouts, have kept some 40,000 borrowers from losing their homes.

Under the initiative announced Tuesday, Countrywide plans to offer an estimated 52,000 borrowers with subprime loans refinancing into prime rate loans or federal assistance mortgage loans insured by the Federal Housing Administration.

The company estimates some 10,000 borrowers with subprime loans who are now behind on their payments due to their mortgage interest rate resetting will be offered rate reductions by the end of the year.

Countrywide shares fell 66 cents, or 4.2 percent, to $15.02 in morning trading Tuesday. The shares have traded in a 52-week range of $14.40 to $45.26.

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