Contact Us

Visit our website at www.bklaw.me OR contact our Massachusetts office at 508-499-3366 or our Rhode Island office at 401-250-5520.


Thursday, June 24, 2010

108 Million Settlement on Countrywide's Servicing Practices

108 Million Settlement on Countrywide's Servicing Practices

Last week, the FTC announced a $108 million settlement with Countrywide based on allegations that Countrywide's loan servicing operations collected excessive fees. The complaint describes Countrywide's servicing practices for default fees as part of its strategy to keep on profiting from consumers, even in hard economic times. I'vepreviously commented on Countrywide's description of this as a "countercyclical diversification strategy" that it trumpeted to investors, and what Senator Schumer thought of such a strategy. The complaint alleges that Countrywide used subsidiaries to mark-up fees--often by 50-100%--on default services such as property inspections. Instead of Countrywide loan servicing working directly with vendors for these default services, Countrywide loan servicing would contract with its subsidiary, who would then work with the vendor. And that extra step--from one Countrywide entity to another--dramatically boosted the fees that got charged to struggling homeowners. To me, the lesson of the FTC's enforcement action is that businesses can use subsidiaries but they can't use subsidiaries to upcharge consumers and obscure the real costs of services.
The settlement also addresses the problems with Countrywide's mortgage servicing in bankruptcy. The FTC alleged many of the same wrongs that I identified in a law review article on mortgage servicing in 2008, including that filing claims that it could not substantiate. The UST Program cooperated with the FTC on the enforcement activity, and the settlement also resolves the UST litigation against Countrywide.
If you are a consumer who filed a chapter 13 bankruptcy case with a mortgage serviced by Countrywide, you may be eligible for a cash award. The FTC website has more details

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.