The mortgage lender has to dole out $108 million in damages, but it may still be engaging in corrupt practices
The Federal Trade Commission has just announced that Countrywide, once the number one mortgage servicer in America, will pay $108 million to settle charges that two of its subsidiary servicing companies overcharged and misled investors. The money is going to go back to the roughly 200,000 homeowners who were overcharged before Countrywide was taken over by Bank of America in 2008. From the FTC release:
“Life is hard enough for homeowners who are having trouble paying their mortgage. To have a major loan servicer like Countrywide piling on illegal and excessive fees is indefensible,” said FTC Chairman Jon Leibowitz. “We’re very pleased that homeowners will be reimbursed as a result of our settlement.”
According to the complaint filed by the FTC, Countrywide’s loan-servicing operation deceived homeowners who were behind on their mortgage payments into paying inflated fees — fees that could add up to hundreds or even thousands of dollars. Many of the homeowners had taken out loans originated or funded by Countrywide’s lending arm, including subprime or “nontraditional” mortgages such as payment option adjustable rate mortgages, interest-only mortgages, and loans made with little or no income or asset documentation, the complaint states.
So, basically, at the heart of the subprime meltdown, the nation’s largest mortgage service provider was profiting off of those homeowners who were in the most trouble — and constantly trying to profit more. One of the tricks they used was this: Once a homeowner fell behind on his or her payments, Countrywide ordered certain services (home inspections, landscaping) performed on the house to help it retain its value. Then, they charged the defaulting owners for these services. While that in itself seems a little cold, it’s legal; what’s not is the fact that Countrywide created subsidiary companies to hire the landscapers and inspectors, and those subsidiary companies marked up the costs, sometimes by 100 percent. So maybe a landscaping company charged $300 to mow the lawn for a month; the Countrywide subsidiary took that cost, marked it up to $600, and charged it directly to the defaulting borrower.
The FTC complaint also charges Countrywide’s two servicers, Countrywide Home Loans Inc. and BAC Home Loans Servicing LP, with lying to homeowners who tried to save their homes by filing for bankruptcy, again telling these borrowers that they owed more than they should or charging exorbitant fees. Sometimes, Countrywide even pursued payment after homeowners had left bankruptcy court — meaning you could declare bankruptcy, getting rid of other unpayable debts, feel like you’re about to make a new start, and then come home to find you’re facing foreclosure.
The settlement is the largest ever assessed in a mortgage servicing case. Eligible borrowers will be mailed notifications in the next few months by the FTC, and then they’ll get refunds from the FTC directly, if the courts accept the settlement.
The settlement has one more interesting tidbit. Though the complaint is clear in saying that the bad behavior happened before the 2008 purchase by Bank of America, it also makes clear that Countrywide, by accepting this settlement, must change its behavior now. It is “permanently barred” from charging fees for services except as required by law or authorized by the lender or consumer, and it can no longer pull the subsidiary/vendor tricks that it once employed — now, the company has to get yearly, independent reviews of the rates that it’s charging for services to make sure they’re reasonable. It also must provide monthly updates and specific fee schedules and outlines to all customers under bankruptcy protection.
So, it sounds like the FTC isn’t actually so confident that Countrywide’s bad behavior has been solved under the umbrella of Bank of America. At least the commision doing something to actively stop them, and to show them that, long-term, this kind of crime doesn’t pay as well as one might imagine.
More Related Stories
- Illinois' fracking and coal rush is a national crisis
- Developers evict historic women's shelter to build luxury hotel
- Kaitlyn Hunt refuses plea offer, will go to court over high school relationship
- DHS admits "impossible" to control 3D-printed guns
- Journalists file suit against Manning trial secrecy
- Russia: Syrian regime ready to talk peace
- Report: Nearly a quarter of all Americans struggle to afford food
- Ted Cruz against the world
- Louie Gohmert: Women should be forced to carry nonviable pregnancies to term
- 2 men arrested for endangering commercial aircraft
- Oversized load blamed for bridge collapse
- This is what Guy Fieri looks like as a balloon
- Iran hackers aiming at U.S. energy firms
- Lawyers release data in attempt to discredit Trayvon Martin
- Anonymous rallies behind Kaitlyn Hunt
- Bridge collapse: Part of "aging infrastructure"
- Mistrial in penalty phase of Arias case
- Amanda Bynes arrested after hurling bong from window
- Interstate 5 bridge collapses north of Seattle
- Mississippi could begin prosecuting women for miscarriages
- Teenage girl claims she was beaten up for looking like Taylor Swift
Featured Slide Shows
The week in 10 picsclose X
- 1 of 11
Lisa Montgomery embraces her nephew Thursday after a tornado tore apart her home in Cleburne, Texas. The twister killed six people and destroyed entire swaths of the North Texas town.
Credit: AP/LM Otero
Jack McMahon, the defense attorney for abortion doctor Kermit Gosnell, speaks outside the Criminal Justice Center in Philadelphia Tuesday. His client was convicted of killing three babies in his clinic, and will serve multiple life sentences.
Credit: AP/Matt Rourke
A photo taken Monday captures Vice President Joe Biden's response to a Milwaukee second-grader's innovative proposal to end America's epidemic of gun violence. This guy!
Credit: AP/Jenny Aicher
Sen. Rand Paul, R-Ky., flanked by a grouper-eyed Michele Bachmann, addresses the IRS' admission that it targeted Tea Party groups in advance of the 2012 election. In an op-ed for CNN Thursday, the Kentucky senator slammed the president for his faux outrage.
Credit: AP/Molly Riley
Ousted IRS chief Steven Miller is sworn in on Capitol Hill Friday. Miller testified before the House Ways and Means Committee on the extra scrutiny the agency gave conservative groups applying for tax-exempt status.
Credit: AP/J. Scott Applewhite
Attorney General Eric Holder pauses as he testifies on Capitol Hill before the House Judiciary Committee Wednesday. Holder is under fire, among other things, for the Justice Department's gathering of phone records at the Associated Press.
Credit: AP/Carolyn Kaster
O.J. Simpson sits during an evidentiary hearing at Clark County District Court in Las Vegas, Nev., Thursday. Simpson, who is currently serving a nine-to-33-year sentence in state prison for armed robbery and kidnapping, is using a writ of habeas corpus to seek a new trial.
Credit: AP/Las Vegas Review-Journal/Jeff Scheid
Major Tom to ground control: On Sunday astronaut Chris Hadfield recorded the first music video from space, a cover of David Bowie's "Space Oddity."
Credit: AP/NASA/Chris Hadfield
When it rains it pours. President Barack Obama speaks during a news conference Thursday with Turkish Prime Minister Recep Tayyip Erdogan, inexplicably inspiring an #umbrellagate Twitter meme.
Credit: AP/Jacquelyn Martin
A smoke plume rises high above a road block at the intersection of County A and Ross Road east of Solon Springs, Wis., Tuesday. No injuries were reported, but the the wildfire caused evacuations across northwestern Wisconsin.
Credit: AP/The Duluth News-Tribune/Clint Austin
Recent Slide Shows
- 1 of 11