FTC, Countrywide Reach $108M Settlement Over Servicing Practices

Posted by Orb Staff on June 07, 2010 No Comments
Categories : Mortgage Servicing

untrywide mortgage servicing companies will pay $108 million to settle Federal Trade Commission (FTC) charges that they collected excessive fees from borrowers who were behind on their mortgage payments. The $108 million settlement represents one of the largest judgments imposed in an FTC case, and the largest mortgage servicing case. The funds will be used to reimburse overcharged homeowners whose loans were serviced by Countrywide before it was acquired by Bank of America in July 2008, the FTC says. According to the FTC's complaint, Countrywide's servicing operation deceived delinquent homeowners into paying inflated fees related to field services, such as property inspections and lawn mowing. Rather than hire third-party vendors to perform the services, Countrywide created subsidiaries to hire the vendors. The subsidiaries marked up the price of the services charged by the vendors – often by 100% or more – and Countrywide then charged the homeowners the marked-up fees, the FTC says. In addition, in servicing loans for borrowers trying to save their homes in Chapter 13 bankruptcy proceedings, Countrywide made false or unsupported claims to borrowers about amounts owed or the status of their loans, and also failed to tell borrowers in bankruptcy when new fees and escrow charges were being added to their loan accounts, the FTC says. The commission alleges that after the bankruptcy case closed and borrowers no longer had bankruptcy court protection, Countrywide unfairly tried to collect those amounts – including, in some cases, via foreclosure. ‘To have a major loan servicer like Countrywide piling on illegal and excessive fees is indefensible," says Jon Leibowitz, FTC chairman. "We're very pleased that homeowners will be reimbursed as a result of our settlement." In March 2008, before being acquired by Bank of America, Countrywide was ranked as the top mortgage servicer in the nation, with a balance of more than $1.4 trillion in its servicing portfolio. The FTC's complaint and settlement order name two mortgage servicers as defendants: Countrywide Home Loans Inc. and BAC Home Loans Servicing LP, formerly doing business as Countrywide Home Loans Servicing LP. In addition to requiring Countrywide to pay $108 million, the settlement order prohibits Countrywide from taking advantage of borrowers who have fallen behind on their payments. Countrywide must advise consumers if it intends to use affiliates for default-related services and, if so, provide a fee schedule of the amounts charged by the affiliates. The settlement also requires Countrywide to make significant changes to its bankruptcy servicing practices, the FTC says. For example, Countrywide must send borrowers in Chapter 13 bankruptcy a monthly notice with information about what amounts the borrower owes, including any fees assessed during the prior month. The defendants also must implement a data integrity program to ensure the accuracy and completeness of the data they use to service loans in Chapter 13 bankruptcy. SOURCE: [link=http://www.ftc.gov/opa/2010/06/countrywide.shtm]Federal Trade Commission

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