September 26, 2020

Countrywide to Distribute Settlement to Its Clients

The number of consumers recovering money in the settlement is the biggest in the F.T.C.’s history and wound up being double what the commission had estimated. Most will get $500 or less, but 5 percent will receive $5,000 or more, the trade commission said.

“It is astonishing that one single company could be responsible for overcharging more than 450,000 homeowners, which is more than 1 percent of all the mortgages in the United States,” Jon Leibowitz, chairman of the trade commission, said in an interview. Countrywide’s “was a business model based on deceit and corruption, and the harm they caused to American consumers is absolutely massive and extraordinary.”

The excessive fees and improper charges were levied on borrowers whose loans were serviced by Countrywide. Most of those receiving money under the settlement — almost 350,000 customers — were routinely charged excessive amounts by Countrywide for default-related services.

To profit from property inspections, title searches and maintenance on homes going through foreclosure, Countrywide set up subsidiaries to do the work and marked up the cost of the services by more than 100 percent. The company’s strategy was aimed at increasing profits from default-related services during bad economic times, the trade commission said. Some troubled borrowers were charged $300 by Countrywide to mow their lawns, for example.

An additional 102,331 people will share in the settlement because Countrywide gave them incorrect figures about how much they owed on their mortgages or added fees and escrow charges without notice, the trade commission said. Because these borrowers had filed Chapter 13 bankruptcies to try to keep their homes, the erroneous amounts supplied by Countrywide were also filed with the courts. Of these borrowers, about 43,000 were charged improper fees that Countrywide levied after their bankruptcies had been concluded and they were no longer under court supervision.

The recipients under the settlement are borrowers whose loans were serviced by Countrywide between Jan. 1, 2005, and July 1, 2008. In addition to being the nation’s largest mortgage lender, Countrywide was the biggest loan servicer, administering $1.4 trillion in mortgages. Countrywide nearly collapsed under the weight of its subprime lending, however, and was acquired in a fire sale by Bank of America in 2008.

It took more than a year to identify all of the borrowers injured by Countrywide’s practices because the company’s records were completely disorganized and chaotic, according to people briefed on the investigation. After the deal was struck, Bank of America was given 30 days to provide the F.T.C. with a list of borrowers who had been overcharged. The company failed to meet the deadline and its later assessments of those who had been victimized were found to be incomplete.

Ultimately, Bank of America had to hire an accounting firm to determine that it had correctly identified all the borrowers who were owed money.

When Bank of America settled the F.T.C.’s charges last year, it said it was doing so “to avoid the expense and distraction associated with litigating the case.” The company did not admit wrongdoing but was barred from the conduct cited by the commission. It also agreed to use a “data integrity program” to ensure that the information it used in servicing loans in Chapter 13 cases was accurate.

Article source: http://feeds.nytimes.com/click.phdo?i=0f5a23d433a39949febd340f52e2c4e0

Speak Your Mind