Countrywide accused of ripoff; consumers to get $108 million
The Federal Trade Commission reached the huge settlement with Bank of America, which acquired Countrywide in 2008. FTC Chairman Jon Leibowitz praised the bank for its posture in trying to compensate customers of the old company and eliminating the policies that in some cases cost people their homes.
At a news conference, Leibowitz said the company was particularly aggressive toward squeezing money out of customers hanging by a financial thread. Penalty upon penalty and fee upon fee was heaped upon consumers who were late or had missed payments.
"Life is hard enough for homeowners who are having trouble paying their mortgage," Leibowitz said. "To have a major loan servicer like Countrywide piling on illegal and excessive fees is indefensible."
Unlike picking a mortgage company, consumers have no say in who will service their loans -- collecting and keeping track of payments. The FTC said Countrywide, which also was a major home loan issuer, was the largest mortgage servicing company in the country.
Leibowitz said Countrywide would pounce on homeowners falling behind on their mortgages and those who already defaulted. The company would order services and assess fees in the name of protecting its investment, but they would be far in excess of the norm -- such as billing $300 for mowing a lawn.
That was only compounded by Countrywide creating subsidiary companies to act as the middleman, hiring others to do the work and then marking them up before passing the charges along to consumers.
Then, if a homeowner filed for bankruptcy to try to hang onto their home, Countrywide could go to the court with inflated figures for what was owed. If the homeowner emerged from bankruptcy, the FTC said, Countrywide continued to pursue the unsubstantiated amount the company claimed was owed -- eventually pushing many into foreclosure.
"Countrywide's practice of piling on inflated fees for Americans who were trying to keep their heads above water and save their homes was just plain wrong," U.S. Sen. John D. Rockefeller IV, chairman of the Senate Commerce committee said in a statement. "This historic settlement should serve as a warning to any company that tries to make money by scamming the American consumer -- if you break the law, you will pay the price."
The settlement affects customers whose loans were serviced by Countrywide Home Loans or BAC Home Loans Servicing who were overcharged prior to July 2008.
Robin Atchley, a letter carrier from Waleska, Ga., said when she and her family emerged from bankruptcy after a rough financial period Countrywide tried to foreclose even after payments were current. The ongoing battle with Countrywide, she said, was brutal and finally led her family to sell the home. Even then, Atchley said, Countrywide wanted even more that it had said was owed previously.
Leibowitz said it will take some time for the government to sort out who is owed what because of poor record-keeping at Countrywide.
"Countrywide's record-keeping was beyond abysmal," he said. "Most frat houses have better record-keeping."
The FTC has set up a site to keep victims informed of progress in determining how the refunds will be distributed.