Thursday, July 21, 2011

FTC paying nearly $108M to Countrywide borrowers

WASHINGTON - Hundreds of thousands of homeowners who took out mortgages with Countrywide Financial Corp. will soon receive their slice of a $108 million settlement over claims that the lender charged outsized fees to borrowers facing foreclosure.

The Federal Trade Commission said Wednesday that it will mail refund checks to 450,177 borrowers starting Thursday.

The action is part of a settlement agreement the agency reached last year with Bank of America Corp., which acquired Countrywide in 2008.

The FTC claimed Countrywide hit borrowers who were behind on their mortgages with fees of several thousand dollars at times. The fees were for such services as property inspections and landscaping that far exceeded market rates. Countrywide created subsidiaries to hire vendors, which marked up the price for such services, the agency said.

In addition, the FTC accused Countrywide of making false claims to some borrowers about how much they owed on their mortgage or the status of their loan, and claimed the lender added fees and other charges to borrowers' mortgage accounts without notice.

The allegations that led to the settlement took place before Bank of America acquired Countrywide.

At the time of the settlement, the FTC estimated Countrywide had overcharged around 200,000 homeowners, but that figure was later revised to more than 450,000 after the agency reviewed the lender's files.

"What we discovered after digging through the records is there were more people who have been subject to these overcharges than we had anticipated, but the amounts they had been overcharged were sufficiently small that everyone could be compensated without exhausting the $108,000," said Tom Pahl, assistant director at the FTC's division of financial practices.

About 347,000 borrowers who overpaid loan default fees will be fully reimbursed, Pahl said.

A group of another 102,000 borrowers who filed for Chapter 13 bankruptcy protection will split what's left of the settlement equally. A subset of that group who were slapped with hidden fees that the FTC was able to confirm also will see those fees fully refunded, Pahl said.

The refunds will be distributed to consumers whose loans were serviced by Countrywide between Jan. 1, 2005, and July 1, 2008, and who were subject to the company's allegedly unlawful practices, the FTC said.

The amount of each refund check will vary from less than $500 to several thousand dollars. Borrowers who receive a refund check should cash them by Sept. 19, the agency said.

The FTC is charged with enforcing federal laws designed to prevent abuses by companies that collect consumers' debts. That's because mortgage-collection activities are typically handled outside the oversight of federal banking regulators.

Associated Press Jul. 20, 2011 12:27 PM

FTC paying nearly $108M to Countrywide borrowers

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