Bank of America to pay $108 million to settle Countrywide case

The agreement with the Federal Trade Commission will create a fund to provide refunds to homeowners who were charged improper fees.

By Jim Puzzanghera, Los Angeles Times
June 7, 2010 | 9:24 a.m.

Reporting from Washington — Homeowners who had mortgages serviced by defunct subprime lender Countrywide Financial Corp. are eligible for refunds of some improper fees under a $108-million settlement announced Monday by the Federal Trade Commission.

The agency began investigating the loan-servicing business of the company, since acquired by Bank of America, in 2008 amid complaints about fees charged to homeowners who had fallen behind on their mortgages and were in default.

Mortgage servicers, who collect monthly payments on loans, are allowed to charge homeowners for items such as property inspections, lawn mowing and other services designed to protect the lender's financial interest in the property, the FTC said.

But as the housing market collapsed, Countrywide created subsidiaries to do the work, then marked up the price of those services by 100% or more, charging homeowners the fees to increase profits from default-related services in bad economic times, the FTC said.

"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.

Countrywide also failed to tell borrowers when it added new charges to their mortgages and made "false or unsupported claims" to borrowers about the how much they owed on their loans, the agency said. The marked-up fees were collected as part of repayment plans, foreclosures or bankruptcies.

The settlement creates a $108-million fund to provide refunds to homeowners who were overcharged before July 2008, when the company was bought by Bank of America.

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, BofA said. The settlement requires the company to stop the practices.

Once the court approves the settlement, the FTC said it would notify eligible homeowners in a process that could take several months. The agency has a website with more information, http://www.ftc.gov/countrywide.

jim.puzzanghera@latimes.com

http://www.latimes.com/business/la-fi-c ... 4494.story