May 7, 2021

Countrywide Will Pay $108 Million for Overcharging Struggling Householders; Mortgage Servicer Inflated Charges, Mishandled Loans of Debtors in Chapter

Two Countrywide mortgage servicing firms pays $108 million to settle Federal Commerce Fee fees that they collected extreme charges from cash-strapped debtors who have been struggling to maintain their houses. The $108 million represents one of many largest judgments imposed in an FTC case, and the biggest mortgage servicing case. It is going to be used to reimburse overcharged householders whose loans have been serviced by Countrywide earlier than it was acquired by Financial institution of America in July 2008.

“Life is difficult sufficient for householders who’re having hassle paying their mortgage. To have a serious personal loan servicer like Countrywide piling on unlawful and extreme charges is indefensible,” stated FTC Chairman Jon Leibowitz. “We’re very happy that householders can be reimbursed on account of our settlement.”

In line with the criticism filed by the FTC, Countrywide’s loan-servicing operation deceived householders who have been behind on their mortgage funds into paying inflated charges – charges that would add as much as tons of and even 1000’s of {dollars}. Lots of the householders had taken out loans originated or funded by Countrywide’s lending arm, together with subprime or “nontraditional” mortgages comparable to cost choice adjustable price mortgages, interest-only mortgages, and loans made with little or no earnings or asset documentation, the criticism states.

Mortgage servicers are chargeable for the day-to-day administration of house owners’ mortgage loans, together with amassing and crediting month-to-month personal loan funds. Householders can’t select their mortgage servicer. In March 2008, earlier than being acquired by Financial institution of America, Countrywide was ranked as the highest mortgage servicer in the US, with a steadiness of greater than $1.4 trillion in its servicing portfolio.

When householders fell behind on their funds and have been in default on their loans, Countrywide ordered property inspections, garden mowing, and different companies meant to guard the lender’s curiosity within the property, in accordance with the FTC criticism. However somewhat than merely rent third-party distributors to carry out the companies, Countrywide created subsidiaries to rent the distributors. The subsidiaries marked up the worth of the companies charged by the distributors – typically by 100% or extra – and Countrywide then charged the householders the marked-up charges. The criticism alleges that the corporate’s technique was to extend income from default-related service charges in unhealthy financial occasions. In consequence, even because the mortgage market collapsed and extra householders fell into delinquency, Countrywide earned substantial income by funneling default-related companies by means of subsidiaries that it created solely to generate income.

In line with the FTC, below most mortgage contracts, householders should pay for mandatory default-related companies, however mortgage servicers could not mark up the associated fee to make a revenue or cost householders for companies that aren’t cheap or applicable to guard the mortgage holder’s curiosity within the property. Householders don’t have any alternative in who performs default-related companies or the price of these companies, and so they haven’t any choice to buy these companies.

As well as, in servicing loans for debtors making an attempt to avoid wasting their houses in Chapter 13 chapter proceedings, the criticism fees that Countrywide made false or unsupported claims to debtors about quantities owed or the standing of their loans. Countrywide additionally failed to inform debtors in chapter when new charges and escrow fees have been being added to their personal loan accounts. The FTC alleges that after the chapter case closed and debtors not had chapter court docket safety, Countrywide unfairly tried to gather these quantities, together with in some instances through foreclosures.

Settlement Phrases

The FTC’s criticism and settlement order title two mortgage servicers as defendants: Countrywide Residence Loans, Inc. and BAC Residence Loans Servicing LP, previously doing enterprise as Countrywide Residence Loans Servicing LP. The settlement requires Countrywide to pay $108 million, which can be refunded to householders who Countrywide overcharged earlier than July 2008.

As well as, the settlement order prohibits Countrywide from profiting from debtors who’ve fallen behind on their funds. The defendants proceed to service hundreds of thousands of mortgage loans, together with tens of 1000’s of loans involving debtors in chapter and foreclosures. Within the servicing of loans, the defendants are completely barred from:

  • Making false or unsubstantiated representations about personal loan accounts, comparable to quantities owed.
  • Charging any payment for a service until it’s licensed by the personal loan devices, by legislation, or by the buyer for a selected service requested by the buyer.
  • Charging any payment for a default-related service until it’s a cheap payment charged by a 3rd get together for work truly carried out. If the service is supplied by an affiliate of a defendant, the payment have to be inside limits set by state legislation, investor tips, and market charges. Defendants should acquire annual, impartial market opinions of their associates’ charges to make sure that they aren’t extreme.

As well as, Countrywide should advise shoppers if it intends to make use of associates for default-related companies and, if that’s the case, present a payment schedule of the quantities charged by the associates.

The settlement additionally requires Countrywide to make vital adjustments to its chapter servicing practices. For instance, Countrywide should ship debtors in Chapter 13 chapter a month-to-month discover with details about what quantities the borrower owes – together with any charges assessed in the course of the prior month. The defendants additionally should implement an information integrity program to make sure the accuracy and completeness of the info they use to service loans in Chapter 13 chapter.

This case was introduced with the invaluable help of the US Trustee Program, the part of the Division of Justice that oversees the administration of chapter instances and personal trustees. This motion represents the FTC’s persevering with work to assist shoppers who’ve been harm by the financial downturn.

For extra details about the case and the FTC’s refund program, see

The Fee vote to authorize workers to file the criticism and settlement was 5-0. The criticism and settlement have been filed within the U.S. District Court docket for the Central District of California.

The Federal Commerce Fee is a member of the interagency Monetary Fraud Enforcement Job Pressure. For extra info on the Job Pressure, go to

NOTE: The Fee recordsdata a criticism when it has “cause to imagine” that the legislation has been or is being violated, and it seems to the Fee {that a} continuing is within the public curiosity. The criticism is just not a discovering or ruling that the defendants have truly violated the legislation. Stipulated court docket orders are for settlement functions solely and don’t essentially represent an admission by the defendants of a legislation violation. Stipulated orders have the total drive of legislation when signed by the choose.

The Federal Commerce Fee works for shoppers to forestall fraudulent, misleading, and unfair enterprise practices and to supply info to assist spot, cease, and keep away from them. To file a criticism in English or Spanish, go to the FTC’s on-line Grievance Assistant or name 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Client Sentinel, a safe, on-line database out there to greater than 1,800 civil and legal legislation enforcement businesses within the U.S. and overseas. The FTC’s Website online gives free info on quite a lot of client subjects.

(FTC File No. 0823205)