Countrywide customers to be repaid $108 million for overcharges
Tuesday, June 8, 2010
Bank of America, owner of former mortgage giant Countrywide Financial, will pay $108 million in refunds to hundreds of thousands of homeowners under one of the largest judgments imposed by the Federal Trade Commission.
The settlement, announced by the FTC on Monday, affects homeowners who were charged excessive fees by Countrywide before it was purchased by Bank of America in July 2008.
Bank of America did not admit any wrongdoing on behalf of Countrywide and said the probe began before it acquired the California-based lender. In a statement, the company said it agreed to the settlement to "avoid the expense and distraction" of litigation.
The FTC alleges that Countrywide's servicing arm, which was once responsible for collecting money on $1.4 trillion worth of loans, deceived borrowers into paying marked-up fees for property inspections, lawn mowing and other services after they defaulted on their loans in order to boost Countrywide's profits when the housing market tanked.
Countrywide created subsidiaries that hired vendors to perform various tasks. The subsidiaries allegedly marked up prices, often by more than 100 percent, and passed them onto homeowners, who did not have the option to shop around for cheaper services.
FTC Chairman Jon Leibowitz said 200,000 homeowners could receive refunds under the settlement. "Life is hard enough for homeowners who are having trouble paying their mortgage," Leibowitz said in a statement. "To have a major loan servicer like Countrywide piling on illegal and excessive fees is indefensible."
During the housing boom, Countrywide was a high-flying mortgage firm that thrived on its ability to grant subprime mortgages, quickly sell them to investors and then use that money to fund more mortgages.
In the first half of 2007, it funded about one in five loans in the United States and it serviced, or collected payments from, borrowers on 14 percent of all outstanding mortgages. When the mortgage market collapsed, the FTC alleges that Countrywide continued to collect substantial profits by funneling default-related services through its subsidiaries.
The FTC also charged that Countrywide made inaccurate claims involving borrowers who had filed for Chapter 13 bankruptcy protection and tried to collect fees it did not disclose in bankruptcy court after bankruptcy cases closed.
Consumers who are eligible for a refund will be mailed letters in coming months. More information is available at http:/