Countrywide Mortgage Gives $108 Million to Homeowners Who Were Overcharged
According to a press release issued today, The Federal Trade Commission (FTC) plans to return nearly $108 million to more than 450,000 homeowners who were overcharged by Countrywide, a unit of Bank of America, for loan servicing fees.
The FTC reached a settlement with Countrywide last year over allegations that the company collected excessive fees from borrowers who were facing foreclosure.
As part of its efforts to protect financially distressed homeowners, the FTC is distributing refunds to consumers whose loans were serviced between January 1, 2005 and July 1, 2008.
The complaint alleges Countrywide's business strategy was to increase profits from default-related services by taking advantage of those homeowners who had defaulted.
These consumers were charged excessive fees for services meant to protect Countrywide's interest in the property, including lawn mowing and property inspections. Instead of hiring third-party vendors to perform the services, Countrywide used subsidiaries to do the hiring. The result was astonishing: The subsidiaries marked up the prices of these services by 100 percent or more, a cost that was then passed on by Countrywide to the at-risk homeowners.
"It's astonishing that a single company could be responsible for overcharging more than 450,000 homeowners," FTC Chairman Jon Leibowitz said. "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 FTC also alleges that Countrywide passed on fees and escrow charges to consumers going through Chapter 13 bankruptcy without notifying them. These homeowners will receive refunds along with those who were overcharged for property inspections, maintenance services, title searches and foreclosure trustee services.
Consumers who receive refund checks should expect to cash them by September 19, 2011. Checks will range from less than $500 into the thousands of dollars, depending on the price of services charged to the homeowner.
"While no doubt welcome, these relatively small refund checks are not much consolation to those who lost their homes or were otherwise damaged by mortgage-related fraud or other wrongdoing. It's an ironic and sad commentary that the FTC, the federal agency which spends most of its time on the watch for false advertising claims, had to step in here. Where was the Fed, the Treasury, and numerous other federal and state agencies that had at least partial jurisdiction over lending activities of banks and non-banks?," said Anthony Sabino, St. John's University business and law professor.
He added: "These refunds are no more than a milligram of a cure, when a full ounce of prevention over the last decade might have prevented a ton of pain."
Update: Bank of America issued the following response:
Last June, Bank of America agreed to settle and resolve claims made by the Federal Trade Commission against Countrywide regarding bankruptcy practices and default servicing fees charged by affiliated companies. These claims related to an investigation that began prior to Bank of America's acquisition of Countrywide and covered former Countrywide entities and transactions only, no legacy Bank of America transactions.Former Countrywide customers with questions should call the redress administrator, Gilardi & Co., LLC at 1-888-230-3196 or visit the FTC's Countrywide settlement web page.
Completing one part of the settlement, the FTC has announced that it is mailing refund checks to former Countrywide customers the agency has identified as eligible to share in the monetary settlement.
As a reminder of our statement when this settlement was first announced last year: Bank of America agreed to this settlement of Countrywide issues to avoid the expense and distraction associated with litigating the case. There was no admission of any wrongdoing as part of the settlement.
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Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!. She blogs about money and real estate at ThinkGlink.comand The Equifax Personal Finance Blog, and is Chief Content Strategist at RealtyJoin.com, a community for real estate investors.
