Foreclosures doubled to 1.44 percent of unpaid principal in December from 0.7 percent a year earlier at the company's unit that handles billing and processing, Countrywide said in a statement today. Late payments advanced to 7.2 percent of unpaid balances from 4.6 percent.

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Countrywide Financial Corp. has announced it will ease the terms on its borrowers whose adjustable rate mortgages are due to be adjusted higher next year.

Why? In a statement, the company says about 52,000 subprime borrowers will be allowed to refinance with FHA loans through next year. Others who are deemed in danger of default will get more lenient terms.

The change in policy comes amid new concerns that the mortgage meltdown in not subsiding, and may actually get worse as more teaser rates expire and are adjusted sharply higher, sometimes raising mortgage payments several hundred dollars per month.

Treasury Secretary Henry Paulson last week sounded a new alarm, calling the housing slump triggered by record home foreclosures this year -- the most significant current risk to our economy. At the same time, Paulson called on lenders, such as Countrywide, to help their customers remain afloat. Countrywide call centers began contacting current subprime customers today.

"Countrywide is committed to helping its customers sustain homeownership," said David Sambol, President and Chief Operating Officer of Countrywide. "Unprecedented times call for unprecedented remedies. 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."

"Countrywide believes that none of our subprime borrowers that have demonstrated the ability to make payments should lose their home to foreclosure solely as a result of a rate reset," said Sambol.

Countrywide made $6 million in subprime loans in December, down from $3.7 billion a year earlier ...

The company said it will offer tailored solutions to its borrowers, falling into two categories:

Refinance Program
For Countrywide borrowers currently in a subprime loan with a strong payment history, a special refinance unit has been created to contact approximately 52,000 borrowers to offer refinance options.

The company has identified and will work to refinance approximately $10 billion of mortgages. For this group, Countrywide will offer borrowers options to refinance into prime or FHA loans.

For those with credit issues, Countrywide will offer Fannie Mae or Freddie Mac's expanded criteria programsYear-to-date, more than 31,000 borrowers have refinanced to prime fixed rate loans totaling more than $5 billion, the company said.

Modification Program
Countrywide said it is working to identify and contact prime and subprime borrowers who are current but unable to qualify for a refinance and are likely to have difficulty affording an upcoming reset.

Countrywide will supplement its early notification letter to borrowers by calling no later than three months prior to the reset to determine their financial circumstances and develop affordable solutions.

Countrywide expects to modify $4.0 billion in loans for approximately 20,000 borrowers in an existing adjustable rate mortgage through the end of 2008.

Delinquent Accounts
Additionally, for subprime borrowers who are currently delinquent and are experiencing financial difficulties as a result of a recent reset, Countrywide said it has implemented a simplified loan modification process.

Countrywide is in the process of sending letters to these borrowers offering a pre-determined, pre- approved rate reduction. It is anticipated that 10,000 additional borrowers, totaling $2.2 billion, will receive modifications through this initiative by year-end.