*Countrywide rejiggers loans

Perhaps sensing some movement from Washington, the Calabasas-based mortgage lender said it would help its subprime borrowers who face huge bumps in interest rates. Countrywide said its plan could help up to 82,000 borrowers with adjustable rate mortgages. Qualifying borrowers will move into prime fixed-rate mortgages, or into home loans guaranteed by the government-sponsored housing agencies Fannie Mae and Freddie Mac. "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," said president and COO David Sambol, who has become the company's mouthpiece (heaven forbid CEO Angelo Mozilo should open his trap). As for Washington, House Democrats have introduced legislation that would heavily restrict lending practices, something Countrywide and the other big players obviously don't want to deal with. (FT, NYT)

*Bart Narter, senior analyst with Celent, a Boston-based financial research and consulting firm, says the $16 billion refinancing plan "is evidence of the fact that, when it comes to the subprime mortgage crisis, Countrywide has seen their available options go from bad to worse." Here's more:

The bad consists of renegotiating loans, and perhaps losing some potential profit, but not flooding the market with even more homes. Countrywide's role as the largest mortgage provider will hopefully set an example in the industry. What’s worse is that Countrywide is foreclosing on homes in a declining market and going through the legal, administrative and financial pain involved in this process. Selling off these foreclosures will further drive down home prices, creating a spiral pain for all those involved.

Meanwhile, consumer bankruptcy filings last month jumped 23 percent from a year earlier. Many are being filed under Chapter 13, which staves off foreclosure proceedings while the homeowner works out a plan to pay off mortgage debt over time. To qualify, debtors must have a regular income and stay current on new bills. There is a downside: A Chapter 13 filing stays on a person's credit file for a decade. In California, the number of nonbusiness Chapter 13 petitions in the second quarter more than doubled from a year earlier. From the WSJ:

Some bankruptcy attorneys are promoting Chapter 13 bankruptcy in press releases and commercials, and are contacting borrowers whose homes are already in the foreclosure process. But it isn't a strategy that works for everyone. Consumer advocates say the homeowners who are most likely to benefit from Chapter 13 are those facing foreclosure because of a temporary financial setback, but who expect to be able to cover their mortgage payments in the future.