FTC: Countrywide borrowers to get $108 million in refunds for alleged abuses
The government agency reached the settlement with Countrywide, which is now owned by Bank of America, last year and will mail the checks to 450,177 defaulting homeowners from whom the company allegedly collected excessive fees
"It's astonishing that a single company could be responsible for overcharging more than 450,000 homeowners," FTC Chairman Jon Leibowitz said in a news release. "Countrywide's unconscionable behavior harmed American consumers on a massive scale and we are proud to be getting every single dollar back to hundreds of thousands of struggling consumers who can least afford to lose the money."
The refunds are being distributed to homeowners whose loans were serviced by Countrywide between Jan. 1, 2005, and July 1, 2008, and were subject to the alleged practices. A summary of some of the practices from the FTC news release are as follows:
According to the FTC, homeowners who were in default on their loans were charged excessive fees for services such as property inspections, lawn mowing, and other services meant to protect the lender's interest in the property.
Rather than simply hire third-party vendors to perform the services, Countrywide used subsidiaries to hire the vendors. The subsidiaries allegedly marked up the price of the services charged by the vendors -– often by 100 percent or more -– and Countrywide then charged the homeowners the marked-up fees.
The FTC complaint alleges that the company's strategy was to increase profits from default-related service fees in bad economic times. Also, in servicing loans for borrowers trying to save their homes in Chapter 13 bankruptcy proceedings, the FTC alleged that Countrywide made false or unsupported claims to borrowers about amounts owed or the status of their loans, and added fees and escrow charges to their mortgage accounts without notice.
In an emailed statement, Rick Simon, a spokesman for BofA, said that the company settled the claims to avoid the cost of litigation. He also that the claims began before the bank's acquisition of Countrywide and cover transactions made by Countrywide only.
"Bank of America agreed to this settlement to avoid the expense and distraction associated with litigating the case," Simon said. "There was no admission of any wrongdoing as part of the settlement."
-- Alejandro Lazo
Photo: Angelo Mozilo, the former chief executive officer of Countrywide Financial Corp., testifies before Congress in 2008. Credit: Jay Mallin / Bloomberg News