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Countrywide customers to be repaid $108 million

Countrywide customers to be repaid $108 million for overcharges Bank of America agrees to create a fund to reimburse homeowners who were assessed improper fees, the FTC announces. At least 200,000 homeowners whose mortgages were serviced by Countrywide will be eligible for reimbursement. (Brian Vander Brug, Los Angeles Times / June 8, 2010) By Jim Puzzanghera, Los Angeles Times June 8, 2010 E-mail Print Share Text Size la-fi-countrywide-mortgages-20100608 Reporting from Washington — People struggling to keep their homes as the housing market collapsed faced additional hurdles if their mortgages were serviced by Countrywide Financial Corp. — inflated fees for property inspections, appraisals and even lawn mowing, the Federal Trade Commission said. Now Bank of America, which bought the Calabasas lender in 2008, has agreed to refund those overcharges — in some cases amounting to thousands of dollars — as part of a $108-million settlement announced Monday. » Don’t miss a thing. Get breaking news alerts delivered to your inbox. “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,” FTC Chairman Jon Leibowitz said. The settlement is the largest for a mortgage servicing case and one of the largest ever by the agency. At least 200,000 homeowners whose mortgages were serviced by Countrywide from 2005 until its sale in July 2008 will be eligible for reimbursement of their overpayments. After a federal court approves the settlement, the FTC said it would notify eligible homeowners in a process that could take several months. The FTC website has more information. The agency began investigating Countrywide’s loan-servicing business amid complaints about fees charged to homeowners who had fallen behind on their mortgages and were in default, or who were trying to save their homes through bankruptcy. Once the nation’s largest mortgage lender, Countrywide has faced a variety of legal actions for its role in the mortgage meltdown, including a civil suit by the Securities and Exchange Commission accusing co-founder Angelo Mozilo and two other executives of misleading investors about the company’s financial condition. Mortgage service companies can charge homeowners who have fallen behind on their loans for services that protect the lender’s financial interest in the property. But as the housing market collapsed, Countrywide created subsidiaries to do such work, then marked up the price of those services 100% or more, charging homeowners the fees to increase company profits in bad economic times, the FTC said. Countrywide also failed to tell customers when it added charges to their mortgages and made “false or unsupported claims” to borrowers about how much they owed on their loans, the agency said. The marked-up fees were collected as part of repayment plans, foreclosures or bankruptcies. “This settlement should be seen as an admission by those behind Countrywide that they made a habit of profiting off the misfortune of their most troubled borrowers,” said Sen. Charles M. Schumer (D-N.Y.), who pressed the FTC in May 2008 to investigate alleged abuses. “These fines will help repay the company’s victims, many of whom have still yet to recover from the abuse they suffered at the hands of Countrywide.” Bank of America agreed to settle the charges “to avoid the expense and distraction associated with litigating the case,” it said in a statement. The settlement involved no admission of wrongdoing, the bank said. The settlement requires the company to stop such practices and make changes to its procedures for homeowners in bankruptcy, including sending borrowers monthly statements noting new fees. Michael Kassing, 39, a software developer in Sacramento, said he paid Countrywide about $1,200 in fees when he was in default on his mortgage for about eight months from 2007 to 2008 for services such as photos of the home. “How much of that is overblown? I have no clue,” he said. But Kassing doubts the total for all of Countrywide’s customers is only $108 million, which would average $540 for the estimated 200,000 people in default during the covered period. He said he’d gladly give up his piece of the settlement and have the case go to trial, potentially leading to greater refunds or more information about other Countrywide practices. But Lucy Morris, the lead FTC attorney on the case, said that under the law the agency can’t seek penalties or fines for Countrywide’s overcharges. The agency only can stop the practices and get money back for consumers.

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June 8, 2010 - Posted by | News

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